Appendix — Mainstream Marketing Services, Inc. v. Federal Trade Commission
Supreme Court brief2004
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TABLE OF CONTENTS
Mainstream Mktg. Servs., Inc. v. FTC, 358 F.3d 1228
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Mainstream Mktg. Servs., Inc. v. FCC, No. 03-9571,
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Do-Not-Call Implementation Act, Pub. L. 108-10, 117
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APPENDIX A
UNITED STATES COURT OF APPEALS
TENTH CIRCUIT
[Filed Feb. 17, 2004]
Nos. 03-1429, 03-6258, 03-9571, 03-9594
MAINSTREAM MARKETING SERVICES, INC., a Colorado
corporation; TMG Marketing, Inc., a Colorado corporation;
American Teleservices Association,
Plaintiffs-Appellees,
V.
FEDERAL TRADE COMMISSION,
Defendant-Appellant,
and
Timothy J. Muris, Chairman of the Federal Trade Commis-
sion; Sheila F. Anthony, Commissioner, Federal Trade
Commission; Mozelle W. Thompson, Commissioner,
Federal Trade Commission; Orson Swindle, Commis-
sioner, Federal Trade Commission; Thomas B. Leary,
Commissioner, Federal Trade Commission; J. Howard
Beales, III, Director, Bureau of Consumer Protection, in
their official capacities,
Defendants.
United States of America,
Intervenor,
Alabama, Alaska, Arizona, Arkansas, California, Colorado,
Connecticut, Delaware, District of Columbia, Florida,
Georgia, Hawaii, Idaho, Illinois, lowa, Kansas, Kentucky,
Louisiana, Maine, Maryland, Massachusetts, Michigan,
Minnesota, Mississippi, Missouri, Montana, Nevada, New
2a
Hampshire, New Jersey, New Mexico, New York, North
Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Puerto
Rico, Rhode Island, South Carolina, South Dakota,
Tennessee, Texas, Utah, Vermont, Virginia, Washington,
West Virginia and Wyoming; AARP; W.J. “Billy” Tauzin,
John D. Dingell, and certain other members of the House
of Representatives of the United States; ACA International;
Undersigned Members of the United States Senate
Committee on Commerce, Science, and Transportation;
The Council of American Survey Research Organizations,
The American Association for Public Opinion Research,
The Council for Marketing and Opinion Research,
Amici Curiae.
U.S. Security, an Oklahoma corporation; Chartered Benefit
Services, Inc., an Illinois corporation, Global Contact
Services, Inc., a Delaware corporation; Infocision
Management Corporation, a Delaware corporation; Direct
Marketing Association, Inc., a New York non-profit
association,
Plaintiffs-Appellees,
Vv.
Federal Trade Commission,
Defendant-Appellant.
Alabama, Alaska, Arizona, Arkansas, California, Colorado,
Connecticut, Delaware, District of Columbia, Florida,
Georgia, Hawaii, Idaho, Illinois, lowa, Kansas, Kentucky,
Louisiana, Maine, Maryland, Massachusetts, Michigan,
Minnesota, Mississippi, Missouri, Montana, Nevada, New
Hampshire, New Jersey, New Mexico, New York, North
Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Puerto
Rico, Rhode Island, South Carolina, South Dakota,
Tennessee, Texas, Utah, Vermont, Virginia, Washington,
3a
West Virginia and Wyoming; ACA International; The
Council of American Survey Research Organizations,
The American Association for Public Opinion Research,
The Council for Marketing and Opinion Research,
Amici Curiae.
MAINSTREAM MARKETING SERVICES, INC., a Colorado
corporation; TMG Marketing, Inc., a Colorado corporation;
American Teleservices Association,
Petitioners,
v.
Federal Communications Commission;
United States of America,
Respondents.
Alabama, Alaska, Arizona, Arkansas, California, Colorado,
Connecticut, Delaware, District Of Columbia, Florida,
Georgia, Hawaii, Idaho, Illinois, lowa, Kansas, Kentucky,
Louisiana, Maine, Maryland, Massachusetts, Michigan,
Minnesota, Mississippi, Missouri, Montana, Nevada, New
Hampshire, New Jersey, New Mexico, New York, North
Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Puerto
Rico, Rhode Island, South Carolina, South Dakota,
Tennessee, Texas, Utah, Vermont, Virginia, Washington,
West Virginia and Wyoming; ACA International; The
Council of American Survey Research Organizations, The
American Association for Public Opinion Research, The
Council for Marketing and Opinion Research,
Amici Curiae.
Competitive Telecommunications Association,
Petitioner,
V.
Federal Communications Commission;
United States of America,
Respondents.
4a
The Council of American Survey Research Organizations,
The American Association for Public Opinion Research,
The Council for Marketing and Opinion Research,
Amici Curiae.
Before SEYMOUR, EBEL and HENRY, Circuit Judges.
EBEL, Circuit Judge.
The four cases consolidated in this appeal involve chal-
lenges to the national do-not-call registry, which allows
individuals to register their phone numbers on a national
“do-not-call list” and prohibits most commercial telemar-
keters from calling the numbers on that list. The primary
issue in this case is whether the First Amendment prevents
the government from establishing an opt-in telemarketing
regulation that provides a mechanism for consumers to
restrict commercial sales calls but does not provide a similar
mechanism to limit charitable or political calls.' We hold that
the do-not-call registry is a valid commercial speech regula-
tion because it directly advances the government’s important
interests in safeguarding personal privacy and reducing the
danger of telemarketing abuse without burdening an exces-
sive amount of speech. In other words, there is a reasonable
fit between the do-not-call regulations and the government’s
reasons for enacting them.
As we discuss below in greater detail, four key aspects of
the do-not-call registry convince us that it is consistent with
First Amendment requirements. First, the list restricts only
' The telemarketers also marshal attacks on the fees they must pay to
access the national do-not-call registry and to the regulations’ exception
for commercial callers who have an established business relationship with
the consumer. We address those alternative arguments in parts IV(A) and
IV(B) below. Finally, in part IV(C), we discuss the FTC’s statutory
authority to enact its national do-not-call regulations.
Sa
core commercial speech--i.e., commercial sales calls.
Second, the do-not-call registry targets speech that invades
the privacy of the home, a personal sanctuary that enjoys a
unique status in our constitutional jurisprudence. See Frisby
v. Schultz, 487 U.S. 474, 484, 108 S.Ct. 2495, 101 L.Ed.2d
420 (1988). Third, the do-not-call registry is an opt-in
program that puts the choice of whether or not to restrict
commercial calls entirely in the hands of consumers. Fourth,
the do-not-call registry materially furthers the government’s
interests in combating the danger of abusive telemarketing
and preventing the invasion of consumer privacy, blocking a
significant number of the calls that cause these problems.
Under these circumstances, we conclude that the require-
ments of the First Amendment are satisfied.
A number of additional features of the national do-not-call
registry, although not dispositive, further demonstrate that the
list is consistent with the First Amendment rights of
commercial speakers. The challenged regulations do not
hinder any business’ ability to contact consumers by other
means, such as through direct mailings or other forms of
advertising. Moreover, they give consumers a number of
different options to avoid calls they do not want to receive.
Namely, consumers who wish to restrict some but not all
commercial sales calls can do so by using company-specific
do-not-call lists or by granting some businesses express
permission to call.’ In addition, the government chose to
offer consumers broader options to restrict commercial sales
calls that: charitable and political calls after finding that
commercial calls were more intrusive and posed a greater
? We express no opinion as to whether the do-not-call registry would
be constitutional if it applied to political and charitable callers.
> The company-specific do-not-call regulations require that a company
must respect a consumer’s request not to receive calls from or on behalf of
that particular business. See 16 C.F.R. § 310.4(b\1\iiiMA); 47 C.F.R.
§ 64.1200(d)(3).
6a
danger of consumer abuse. The government also had evi-
dence that the less restrictive company-specific do-not-call
list did not solve the problems caused by commercial
telemarketing, but it had no comparable evidence with respect
to charitable and political fundraising.
The national do-not-call registry offers consumers a tool
with which they can protect their homes against intrusions
that Congress has determined to be particularly invasive. Just
as a consumer can avoid door-to-door peddlers by placing a
“No Solicitation” sign in his or her front yard, the do-not-call
registry lets consumers avoid unwanted sales pitches that
invade the home via telephone, if they choose to do so. We
are convinced that the First Amendment does not prevent the
government from giving consumers this option.
I. BACKGROUND
In 2003, two federal agencies--the Federal Trade Commis-
sion (FTC) and the Federal Communications Commission
(FCC)--promulgated rules that together created the national
do-not-call registry. See 16 C.F.R. § 310.4(b)(1)(iii)(B) (FTC
rule); 47 C.F.R. § 64.1200(c)(2) (FCC rule).* The national
do-not-call registry is a list containing the personal telephone
* Congress has directed the FCC to coordinate its efforts with the FTC
in order to maximize consistency between the agencies’ do-not-call
regulations. Do-Not-Call Implementation Act, Pub.L. No. 108-10, 117
Stat. 557 (2003). Although the FTC and FCC rules are consistent in most
respects, there are some situations in which a telemarketer could be
subject to do-not-call restrictions under one agency’s rule but exempt
under the other’s. See Federal Trade Commission, Report to Congress
Pursuant to the Do-Not-Call Implementation Act on Regulatory
Coordination in Federal Telemarketing Laws (2003); Federal Commu-
nications Commission, Report on Regulatory Coordination (2003). In the
interest of simplicity, and because any inconsistencies between the two
rules do not affect our constitutional analysis, we generally refer to both
agencies’ do-not-cali provisions as a single regulatory measure (the
do-not-call registry). When we mean to discuss the FTC rule or the FCC
rule in particular, we do so explicitly.
Ta
numbers of telephone subscribers who have voluntarily indi-
cated that they do not wish to receive unsolicited calls from
commercial telemarketers.. Commercial telemarketers are
generally prohibited from calling phone numbers that have
been placed on the do-not-call registry, and they must pay an
annual fee to access the numbers on the registry so that they
can delete those numbers from their telephone solicitation
lists. So far, consumers have registered more than 50 million
phone numbers on the national do-not-call registry.
The national do-not-call registry’s restrictions apply only
to telemarketing calls made by or on behalf of sellers of
goods or services, and nyt to charitable or political fund-
raising calls. 16 C.F.R. $§ 310.4(b)(1)(iii)(B), 310.6(a); 47
C.F.R. §§ 64.1200(c)(2), 64.1200(f)(9).° Additionally, a
seller may call consumers who have signed up for the
national registry if it has an established business relationship
with the consumer or if the consumer has given that seller
express writien permission to call. 16 C.F.R. § 310.4(b)(1)
(iii)(B)(i-ii); 47 C.F.R. § 64.1200(f)(9)(i-ii).’ Telemarketers
*Consumers can register their personal phone numbers for the
do-not-call list either by phone or online.
° There has been some confusion throughout this litigation with respect
to how to define the term “telemarketing.” Compare Telemarketing and
Consumer Fraud and Abuse Prevention Act of 1994, Pub.L. No. 103-297,
108 Stat. 1545 at §§ 7 (1994) (“Telemarketing Act”) (defining “tele-
marketing” as calls “conducted to induce purchases of goods or services”)
with Mainstream Mktg. Servs., Inc. v. FTC, 283 F.Supp.2d 1151, 1154
(D.Colo.2003) (describing “telemarketing” as the practice of “soliciting
sales and donations” conducted by businesses, charities, political organi-
zations, and others). Uniess otherwise indicated, we use the term
“telemarketing” to refer to conimercial sales calls made to induce
purchases of goods or services (not charitable or political fundraising)
consistent with Congress’ definition in the Telemarketing Act.
’ The “established business relationship” exception allows businesses
to call customers with whom they have conducted a financial transaction
or to whom they have sold, rented, or leased goods or services within 18
months of the telephone call. 47 C.F.R. § 64.1200(f)(3); Telemarketing
8a
generally have three months from the date ci: which a
consumer signs up for the registry to remove the consumer’s
phone number from their call lists. 16 C.F.R. § 310.4(b)
(3)(iv); 47 C.F.R. § 64.1200(c)(2)(i)(D). Consumer registra-
tions remain valid for five years, and phone numbers that are
disconnecied or reassigned will be periodically removed from
the registry. 47 C.F.R § 64.1200(c)(2); Telemarketing Sales
Rule, Statement of Basis and Purpose, 68 Fed.Reg. 4580,
4640 (Jan. 29, 2003).
The national do-not-call registry is the product of a
regulatory effort dati.g back to 1991 aimed at protecting the
privacy rights of consumers and curbing the risk of
telemarketing abuse. See generally FTC v. Mainstream Mktg.
Servs., Inc., 345 F.3d 850, 857-58 (10th Cir.2003). In the
Telephone Consumer Protection Act of 1991 (“TCPA”)--
under which the FCC enacted its do-not-call rules--Congress
found that for many consumers telemarketing sales calls
constitute an intrusive invasion of privacy. See Pub.L. No.
102-243, 105 Stat. 2394 at § 2 (1991). Moreover, the
TCPA’s legislative history cited statistical data indicating that
“most unwanted telephone solicitations are commercial in
nature” and that “unwanted commercial calls are a far bigger
problem than unsolicited calls from political or charitable
organizations.” H.R.Rep. No. 102-317 at 16 (1991). The
TCPA therefore authorized the FCC to establish a national
database of consumers who object to receiving “telephone
Sales Rule, Statement of Basis and Purpose, 68 Fed.Reg. 4580, 4591 (Jan.
29, 2003). Additionally, sellers can call consumers on the national
do-not-call registry within three months after the consumer makes an
inquiry or application. 47 C.F.R § 64.1200(f)(3). A seller who has an
established business relationship with a consumer is still bound to comply
with the company-specific rules if the consumer requests not to be called.
Id. at § 64.1200(f)(3)(i).
9a
solicitations,” which the act defined as commercial sales
calls. Pub.L. No. 102-243, 105 Stat. 2394 at § 3.°
Furti.ermore, in the Telemarketing and Consumer Fraud
and Abuse Prevention Act of 1994 (“Telemarketing Act”)--
under which the FTC enacted its do-not-call rules--Congress
found that consumers lose an estimated $40 billion each year
due to telemarketing fraud. See Pub.L. No. 103-297, 108
Stat. 1545 at § 2 (1994). Therefore, Congress authorized the
FTC to prohibit sales calls that a reasonable consumer would
consider coercive or abusive of his or her right to privacy. /d.
at § 3.
The FCC and FTC initially sought to accomplisk the goals
of the TCPA and the Telemarketing Act by adopting
company-specific do-not-call lists, requiring sellers to main-
tain lists of consumers who have requested not to be called by
that particular solicitor, and requiring telemarketers to honor
those requests. See Rules and Regulations Implementing the
Telephone Consumer Protection Act of 1991, Report and
Order, 7 FCC Red. 8752 at § 23-24 (Sept. 17, 1992); Tele-
marketing Sales Rule, Statement of Basis and Purpose, 60
Fed.Reg. 43842, 43854-55 (Aug. 23, 1995). Yet in enacting
the national do-not-call registry, the agencies concluded that
the company-specific lists had failed to acliieve Congress’
objectives. See Telemarketing Sales Rule, Statement of Basis
and Purpose, 68 Fed Reg. 4580, 4629, 4631 (Jan. 29, 2003);
Ruizs and Regulations Implementing the Telephone Con-—
sumer Protection Act (TCPA) of 1991, 68 Fed.Reg. 44144,
44144-45 (July 25, 2003). Among other shortfalls, the
agencies explained that the large number of possible tele-
phone solicitors made it burdensome for consumers to assert
* The TCPA defines a “telephone solicitation” as a “telephone call or
message for the purpose of encouraging the purchase or rental of, or
investment in, property, goods, or services,” excluding, inter alia, calls
from tax exempt nonprofit organizations. Pub.L. No. 103-297, 108 Stat.
1545 at § 3.
10a
their rights under the company-specific rules, and that
commercial telemarketers often ignored consumers’ requests
not to be called. 68 Fed.Reg. ai 4629. Accordingly, the
agencies decided to keep the company-specific rules as an
option available to consumers, but to supplement them with
the national do-not-call registry. Jd.; 68 Fed.Reg. at 44144.
In this appeal we have consolidated four cases challenging
various aspects of the national do-not-call registry.” Cases
Nos. 03-1429, 03-6258 and 03-9571 involve First Amend-
ment attacks on the do-not-call list and its registry fees. We
address these issues in parts III and IV(A) respectively. Case
No. 03-9594 involves a challenge to the FCC rule’s
established business relationship exception on administrative
law grounds. We address this issue in part IV(B). Finally, in
part IV(C), we address the alternative argument that the FTC
lacked statutory authority to enact its do-not-call regulations,
an argument that the district court relied upon in case
No. 03-6258. We conclude that all of the telemarketers’
challenges lack merit and we uphold the do-not-call list in
its entirety.
II. STANDARD OF REVIEW
The constitutionality of the national do-not-call registry
and its fees under the First Amendment are questions of law
° Case No. 03-1429 reaches us on appeal from the District of Colorado,
which held that the FfC’s do-not-call rules were unconstitutional on First
Amendment grounds. In that case, the district court enjoined the FTC
from implementing the do-not-call registry. We stayed that injunction,
pending our review on the merits, in FTC v. Mainstream Mktg. Servs.,
Inc., 345 F.3d 850 (10th Cir.2003). Case No. 03-6258 reaches us on
appeal from the Western District of Oklahoma, which held that the FTC
lacked the statutory authority to enact its do-not-call rules. In that case,
the court also approved certain unrelated aspects of the Telemarketing
Sales Rule, and the portions of its decision addressing those issues are not
before us on appeal. In cases No. 03-9571 and No. 03-9594, we review
the FCC order directly pamene to 47 U.S.C. § 402(a) and 28 U.S.C.
§ 2342.
lla
we review de novo. See Phelan v. Laramie County Cmby.
Coll. Bd. of Trs., 235 F.3d 1243, 1246 (10th Cir.2000). We
review whether the FCC’s decision to include an established
business relationshin exception violated the Administrative
Procedure Act under the arbitrary and capricious standard.
See Friends of the Bow v. Thompson, 124 F.3d 1210, 1215
(10th Cir.1997). Finally, we review de novo a district court’s
decision that an agency lacked authority under the controlling
statute to act, keeping in mind that the courts owe deference
to a federal agency’s interpretation of a statute it administers.
See Southern Utah Wilderness Alliance v. Dabney, 222 F.3d
819, 824 (..th Cir.2000) (citing Chevron U.S.A., Inc. v.
Natural Res. Def. Council, Inc., 467 U.S. 837, 842- 43, 104
S.Ct. 2778, 81 L.Ed.2d 694 (1984)).
Ili. FIRST AMENDMENT ANALYSIS
The national do-not-call registry’s telemarketing restric-
tions apply only to commercial speech. L'ke most commer-
cial speech regulations, the do-not-call rules draw a line
between commercial and non-commercial speech on the basis
of content. See Metromedia, Inc. v. City of San Diego, 453
U.S. 490, 504 n. 11, 101 S.Ct. 2882, 69 L.Ed.2d 800 (1981)
(“If commercial speech is to be distinguished, it must be
distinguished by its content.”); Bates v. State Bar of Ariz.,
433 U.S. 35U, 363, 97 S.Ct. 2691, 53 L.Ed.2d 810 (1977)
(same). In reviewing commercial speech regulations, we
apply the Central Hudson test. Central Hudson Gas & Elec.
Corp. v. Pub. Serv. Comm'n of N.Y., 447 U.S. 557, 566, 100
S.Ct. 2343, 65 L.Ed.2d 341 (1980); see also City of Cincin-
nati v. Discovery Network, Inc., 507 U.S. 410, 416, 429-30,
113 S.Ct. 1505, 123 L.Ed.2d 99 (1993) (noting that the
challenged law drew content-based distinctions between
commercial and non-commercial speech and applying more
lenient scrutiny under Central Hudson); Florida Bar v. Went
For It, Inc., 515 U.S. 618, 634-35, 115 S.Ct. 2371, 132
L.Ed.2d 541 (1995) (“This case . . . concerns pure cormmer-
12a
cial advertising, for which we have always reserved a lesser
degree of protection under the First Amendment.”);
Lanphere & Urbaniak v. Colorado, 21 F.3d 1508, 1513 (10th
Cir.1994) (content-based regulations disadvantaging commer-
cial speech are reviewed pursuant to the lesser degree of First
Amendment protection provided in Central Hudson).
Central Hudson established a three-part test governing
First Amendment challenges to regulations restricting non-
misleading commercial speech that relates to lawful activity.
First, the government must assert a substantial interest to be
achieved by the regulation. Central Hudson, 447 U.S. at 564,
100 S.Ct. 2343. Second, the regulation must directly advance
that governmental interest, meaning that it must do more than
provide “only ineffective or remote support for the govern-
ment’s purpose.” Jd. Third, although the regulation need not
be the least restrictive measure available, it must be narrowly
tailored not to restrict more speech than necessary. See id. ;
Board of Trs. of the State Univ. of N.Y. v. Fox, 492 U.S. 469,
480, 109 S.Ct. 3028, 106 L.Ed.2d 388 (1989). Together,
these final two factors require that there be a reasonable fit
between the government’s objectives and tne means it
chooses to accomplish those ends. United States v. Edge
Broad. Co., 509 U.S. 418, 427-28, 113 S.Ct. 2696, 125
L.Ed.2d 345 (1993).
The government bears the burden of asserting one or more
substantial governmental interests and demonstrating a
reasonable fit between those interests and the challenged
regulation. Utah Licensed Beverage Ass'n v. Leavitt, 256
F.3d 1061, 1069 (10th Cir.2001).. The government is not
limited in the evidence it may use to meet its burden. For
example, a commercial speech regulation may be justified by
anecdotes, history, consensus, or simple common sense.
Went For It, 515 U.S. at 628, 115 S.Ct. 2371. Yet we may
not take it upon ourselves to supplant the interests put
forward by the state with our own ideas of what goals the
13a
challenged laws might serve. Edenfield v. Fane, 507 U.S.
761, 768, 113 S.Ct. 1792, 123 L.Ed.2d 543 (1993).
A. Governmental Interests
The government asserts that the do-not-call regulations are
justified by its interests in 1) protecting the privacy of
individuals in their homes, and 2) protecting consumers
against the risk of fraudulent and abusive solicitation. See 68
Fed.Reg. 44144; 68 Fed.Reg. at 4635. Both of these justifi-
cations are undisputedly substantial governmental interests.
In Rowan v. United States Post Office Dep't, the Supreme
Court upheld the right of a homeowner to restrict material
that could be mailed to his or her house. 397 U.S. 728, 90
S.Ct. 1484, 25 L.Ed.2d 736 (1970). The Court emphasized
the importance of individual privacy, particularly in the
context of the home, stating that “the ancient concept that ‘a
man’s home is his castle’ into which ‘not even the king may
enter’ has lost none of its vitality.” Jd. at 737, 90 S.Ct. 1484.
In Frisby v. Schultz, the Court again stressed the unique
nature of the home and recognized that “the State’s interest in
protecting the well-being, tranquility, and privacy of the
home is certainly of the highest order in a free and civilized
society.” 487 U.S. 474, 484, 108 S.Ct. 2495, 101 L.Ed.2d
420 (1988) (quoting Carey v. Brown, 447 U.S. 455, 471, 100
S.Ct. 2286, 65 L.Ed.2d 263 (1980)). As the Court held
in Frisby: |
One important aspect of residential privacy is protection
of the unwilling listener... . [A] special benefit of the
privacy all citizens enioy within their own walls, which
the State may legislate io protect, is an ability to avoid
intrusions. Thus, we have repeatedly held that individu-
als are not required to welcome unwanted speech into
their own homes and that the government may protect
this freedom.
Id. at 484-85, 108 S.Ct. 2495 (citations omitted). Likewise,
in Hill v. Colorado, the Court called the unwilling listener’s
l4a
interest in avoiding unwanted communication part of the
broader right to be let alone that Justice Brandeis described as
“the right most valued by civilized men.” 530 U.S. 703,
716-17, 120 S.Ct. 2480, 147 L.Ed.2d 597 (2000) (quoting
Olmstead v. United States, 277 U.S. 438, 478, 48 S.Ct. 564,
72 L.Ed. 944 (1928) (Brandeis, J., dissenting)). The Court
added that the right to avoid unwanted speech has special
force in the context of the home. /d; see also FCC v.
Pacifica Found., 438 U.S. 726, 748, 98 S.Ct. 3026, 57
L.Ed.2d 1073 (1978) (“{I]n the privacy of the home . . . the
individual’s right to be left alone plainly outweighs the First
Amendment rights of an intruder.”).
Additionally, the Supreme Court has recognized that the
government has a substantial interest in preventing abusive
and coercive sales practices. Edenfield v. Fane, 507 U.S. 761,
768-69, 113 S.Ct. 1792, 123 L.Ed.2d 543 (1993) (“[T]he First
Amendment . . . does not prohibit the State from insuring that
the stream of commercial information flow[s] cleanly as well
as freely.”) (quoting Virginia State Bd. of Pharmacy v.
Virginia Citizens Consumer Council, Inc., 425 U.S. 748,
771-72, 96 S.Ct. 1817, 48 L.Ed.2d 346 (1976)).
B. Reasonable Fit
A reasonable fit exists between the do-not-call rules and
the government’s privacy and consumer protection interests if
the regulation directly advances those interests and is nar-
rowly tailored. See Central Hudson, 447 U.S. at 564-65, 100
S.Ct. 2343. In this context, the “narrowly tailored” standard
does not require that the government’s response to protect
substantial interests be the least restrictive measure available.
All that is required is a proportional response. Board of Trs.
of State Univ. of N.Y. v. Fox, 492 U.S. 469, 480, 109 S.Ct.
3028, 106 L.Ed.2d 388 (1989).
In other words, the national do-not-call registry is valid if it
is designed to provide effective support for the government’s
15a
purposes and if the government did not suppress an excessive
amount of speech when substantially narrower restrictions
would have worked just as well. See Central Hudson, 447
U.S. at 564-65, 100 S.Ct. 2343. These criteria are piainly
established in this case. The do-not-call registry directly ad-
vances the government’s interests by effectively blocking a
significant number of the calls that cause the problems the
government sought to redress. It is narrowly tailored because
its opt-in character ensures that it does not inhibit any speech
directed at the home of a willing listener.
1. Effectiveness
The telemarketers assert that the do-not-call registry is
unconstitutionally underinclusive because it does not apply to
charitable and political callers. First Amendment challenges
based on underinclusiveness face an uphill battle in the com-
mercial speech context. As a general rule, the First Amend-
ment does not require that the government regulate all aspects
of a problem before it can make progress on any front.
United States v. Edge Broad. Co., 509 U.S. 418, 434, 113
S.Ct. 2696, 125 L.Ed.2d 345 (1993). “Within the bounds of
the general protection provided by the Constitution to com-
mercial speech, we allow room for legislative judgments.”
Id. The underinclusiveness of a commercial speech regula-
tion is relevant only if it renders the regulatory framework so
irrational that it fails materially to advance the aims that it
was purportedly designed to further. See Rubin v. Coors
Brewing Co., 514 U.S. 476, 489, 115 S.Ct. 1585, 131 L.Ed.2d
532 (1995); see also Central Hudson, 447 U.S. at 564, 100
S.Ct. 2343 (“If a regulation “provides only ineffective or
remote support for the government’s purpose” it cannot be
said to bear a reasonable fit with that purported objective”).
Cf. City of Ladue v. Gilleo, 512 U.S. 43, 51, 114 S.Ct. 2038,
129 L.Ed.2d 36 (1994) (underinclusiveness provides a basis
for a First Amendment claim when it constitutes an “attempt
l6a
to give one side of a debatable public question an advantage
in expressing its views to the people’).
In Rubin, for example, the Supreme Court struck down a
law prohibiting brewers from putting the alcohol content of
their product on beer labels, purportedly in an effort to
discourage “strength wars.” 514 U.S. at 478, 115 S.Ct. 1585.
However, the law allowed advertisements disclosing the
alcohol content of beers, allowed sellers of wines and spirits
to disclose alcohol content on labels (and even required such
disclosure for certain wines), and allowed brewers to signal
high alcohol content by using the term “malt liquor.” /d. at
488-89, 115 S.Ct. 1585. Under these circumstances, the
Court concluded that there was little chance that the beer
label rule would materially deter strength wars in light of the
“irrationality of this unique and puzzling regulatory frame-
work.” Jd. at 489, 115 S.Ct. 1585.
Likewise, in City of Cincinnati v. Discovery Network, the
Court struck down a law prohibiting commercial newsracks
on public property, purportedly in order to promote the safety
and attractive appearance of its streets and sidewalks. 507
U.S. 410, 412, 113 S.Ct. 1505, 123 L.Ed.2d 99 (1993).
However, the ban applied to only 62 of the 1,500 to 2,000
newsracks in the city, thus addressing only a “minute” and
“paltry” share of the problem. /d. at 417-18, 113 S.Ct. 1505.
Moreover, the challenged ordinance was not enacted in an
effort to address problems posed by newsracks, but was
actually an “outdated prohibition against the distribution of
any commercial handbills on public property . . . enacted long
before any concern about newsracks developed.” /d. For
these reasons, the Court held in part II of that opinion that
“the city did not establish the reasonable fit we require.” Id.
at 417-18, 113 S.Ct. 1505.
Yet so long as a commercial speech regulation materially
furthers its objectives, underinclusiveness is not fatal under
Central Hudson. For example, in Edge Broadcasting the
17a
Supreme Court approved a regulation that prohibited broad-
casters in North Carolina (which did not permit lotteries)
from broadcasting lottery advertisements on the radio, even
as applied to a broadcaster located near the border of Virginia
(where lotteries were legal) whose audience consisted of 92.2
percent Virginians. 509 U.S. 418, 423-24, 431-33, 113 S.Ct.
2696, 125 L.Ed.2d 345 (1993). The Court found it deter-
minative that the regulation prevented lottery ads from
reaching about 127,000 North Carolina residents (7.8 percent
of Edge’s listeners):
It could hardly be denied . . . that these facts, standing
alone, would clearly show that applying the statutory
restriction to Edge would directly serve the statutory
purpose of supporting North Carolina’s antigambling
policy... . [T]his result could hardly be called either
“ineffective,” “remote,” or “conditional.” Nor could it
be called only “limited incremental support” for the
Government interest.
Id. at 432, 113 S.Ct. 2696 (citations omitted). The Court re-
jected Edge’s argument that the regulations banning lottery
advertising by in-state radio failed materially to advance the
government’s interests because North Carolina residents were
already inundated with lottery advertising from other sources,
such as Virginia radio and television programs. /d. at 434-35,
113 S.Ct. 2696. “[T]he Government may be said to advance
its purpose by substantially reducing lottery advertising, even
where it is not wholly eradicated.” Jd. at 434, 113 S.Ct. 2696;
see also Metromedia, Inc. v. City of San Diego, 453 U.S. 490,
511, 101 S.Ct. 2882, 69 L.Ed.2d 800 (1981) (“[P]rohibition
of offsite advertising is directly related to the stated objec-
tives of traffic safety and esthetics. This is not altered by the
! In the North Carolina counties Edge served, its broadcasts accounted
for about 11 percent of all radio listening. Edge Brvad., 509 U.S. at 431-
32, 113 S.Ct. 2696.
18a
fact that the ordinance is underinclusive because -it permits
onsite advertising.”).
As discussed above, the national do-not-call registry is
designed to reduce intrusions into personal privacy and the
risk of telemarketing fraud and abuse that accompany un-
wanted telephone solicitation. The registry directly advances
those goals. So far, more than 50 million telephone numbers
have been registered on the do-not-call list, and the do-not-
call regulations protect these households from receiving most
unwanted telemarketing calls. According to the telemar-
keters’ own estimate, 2.64 telemarketing calls per week--or
more than 137 calls annually--were directed at an average
consumer before the do-not-call list cam into effect. Cf 68
Fed.Reg. at 44152 (discussing the five-fold increase in the
total number of telemarketing calls between 1991 and 2003).
Accordingly, absent the do-not-call registry, telemarketers
would call those consumers who have already signed up for
the registry an estimated total of 6.85 billion times each year.
To be sure, the do-not-call list will not block all of these
calls. Nevertheless, it will prohibit a substantial number of
them, making it difficult to fathom how the registry could be
called an “ineffective” means of stopping invasive or abusive
calls, or a regulation that “furnish{es] only speculative or
marginal support” for the government’s interests. See also id.
(noting the effectiveness of state do-not-call lists in reducing
unwanted telemarketing calls).'!
'l It is unclear from the record exactly how many telemarketing calls
will be blocked by the do-not-call regulations. Most significantly, we
have not been provided with data as to how many of these unsolicited
sales calls would be permissible under the established business relation-
ship exception. In applying Central Hudson, however, we are entitled to
rely on anecdotal evidence and make the common sense observation that
the do-not-call list will apply to a substantial number of telemarketing
calls. See Went For It, 515 U.S. at 628, 115 S.Ct. 2371; cf 68 Fed.Reg.
at 44153-54 (suggesting that the volume of calls exempted under the
19a
Furthermore, the do-not-call list prohibits not only a
significant number of commercial sales calls, but also a
significant percentage of all calls causing the problems that
Congress sought to address (whether commercial, charitable
or political). The record demonstrates that a substantial share
of all solicitation calls will be governed by the do-not-call
rules. See H.R.Rep. No. 102-317, at 16 (1991) (“[MJost un-
wanted telephone solicitations are commercial in nature.”’);
68 Fed.Reg. at 44153-54 (the high volume and unexpected
nature of commercial calls subject to the national do-not-
call registry makes those calls more problematic than
nonprofit calls and solicitations based on established business
relationships).
The telemarketers asserted before the FTC that they might
have to lay off up to 50 percent of their employees if the
national do-not-call registry came into effect. See 68 Fed.
Reg. at 4631. It is reasonable to conclude that the
telemarketers’ planned reduction in force corresponds to a
decrease in the amount of calls they will make. Significantly,
the percentage of unwanted calls that will be prohibited will
be even higher than the percentage of all unsolicited calls
blocked by the list. The individuals on the do-not-call list
have declared that they do not wish to receive unsolicited
commercial telemarketing calls, whereas those who do want
to continue receiving such calls will not register. Cf 68
Fed.Reg. at 4632 (under the national do-not-call regulations,
“telemarketers would reduce time spent calling consumers »
who do not want to receive telemarketing calls and would be
able to focus their calls only on those who do not object”).
established business relationship exception most likely will be relatively
low compared to the volume of calls subject to the do-not-call
restrictions); 68 Fed.Reg. at 4631 (noting that telemarketers expect to lay
off up to half of their employees in response to the do-not-call
regulations).
20a
Finally, the type of unsolicited calls that the do-not-call list
does prohibit--commercial sales calls--is the type that
Congress, the FTC and the FCC have all determined to be
most to blame for the problems the government is seeking to
redress. According to the legislative history accompanying
the TCPA, “[c]omplaint statistics show that unwanted com-
mercial calls are a far bigger problem than unsolicited calls
from political or charitable organizations.” H.R.Rep. No.
102-317, at 16 (1991) (noting that non-commercial calls were
less intrusive to consumers’ privacy because they are more
expected and because there is a lower volume of such calls);
see also 68 Fed.Reg. at 44153. Similarly, the FCC deter-
mined that calls from solicitors with an estabiished business
relationship with the recipient are less problematic than other
commercial calls. 68 Fed.Reg. at 44154 (“Consumers are
more likely to anticipate contacts from companies with whom
they have an existing relationship and the volume of such
calls will most likely be lower.”).
Additionally, the FTC has found that commercial callers
are more likely than non-commercial callers to engage in .
deceptive and abusive practices. 68 Fed.Reg. at 4637 (“When
a pure commercial transaction is at stake, callers have an
incentive to engage in all the things that telemarketers are
hated for. But non-commercial speech is a different mat-
ter.”). Specifically, the FTC concluded that in charitable and
political calls, a significant purpose of the call is to sell a
cause, not merely to receive a donation, and that non-
commercial callers thus have stronger incentives not to
alienate the people they call or to engage in abusive and
deceptive practices. Id.; cf. Village of Schaumburg v. Citi-
zens for a Better Env’t, 444 U.S. 620, 632, 100 S.Ct. 826, 63
L.Ed.2d 73 (1980) (‘[B]ecause charitable solicitation does
more than inform private economic decisions and is not
primarily concerned with providing information about the
characteristics and cests of goods and services, it is not dealt
with as a variety of purely commercial speech.”). The speech
pik ileal
edinb > ay.
fe An eee eae
2la
regulated by the do-not-call list is therefore the speech most
likely to cause the problems the government sought to
alleviate in enacting that list, further demonstrating that the
regulation directly advances the government’s interests.
In sum, the do-not-call list directly advances the govern-
ment’s interests--reducing intrusions upon consumer privacy
and the risk of fraud or abuse--by restricting a substantial
number (and also a substantial percentage) of the calls that
cause these problems. Unlike the regulations struck down in
Rubin and Discovery Network, the do-not-call list is not so
underinclusive that it fails materially to advance the
government’s goals.
2. Narrow Tailoring
Although the least restrictive mearis test is not the test to be
used in the commercial speech context, commercial speech
regulations do at least have to be “narrowly tailored” and
provide a “reasonable fit” between the problem and the
solution. Whether or not there are “numerous and obvious
less-burdensome alternatives” is a relevant consideration in
our narrow tailoring analysis. Went For It, 515 U.S. at 632,
115 S.Ct. 2371. A law is narrowly tailored if it “promotes a
substantial government interest that would be achieved less
effectively absent the regulation.” Ward v. Rock Against
Racism, 491 U.S. 781, 799, 109 S.Ct. 2746, 105 L.Ed.2d 661
(1989). Accordingly, we consider whether there are numerous
and obvious alternatives that would restrict less speech and
would serve the government’s interest as effectively as the
challenged law. See Central Hudson, 447 U.S. at 565, 100
S.Ct. 2343; Edge Broad., 509 U.S. at 430, 113 S.Ct. 2696.
We hold that the national do-not-call registry is narrowly
tailored because it does not over-regulate protected speech;
rather, it restricts only calls that are targeted at unwilling
recipients. Cf Frisby v. Schultz, 487 U.S. 474, 485, 108 S.Ct.
2495, 101 L.Ed.2d 420 (1988) (“There simply is no right to
22a
force speech into the home of an unwilling listener.”),
Rowan v. United States Post Office Dep’t, 397 U.S. 728, 738,
90 S.Ct. 1484, 25 L.Ed.2d 736 (1970) (“We therefore cate-
gorically reject the argument that e vendor has a right under
the Constitution or otherwise to send unwanted material into
the home of another.”). The do-not-call registry prohibits
only telemarketing calls aimed at consumers who have
affirmatively indicated that they do not want to receive such
calls and for whom such calls would constitute an invasion of
. privacy. See Hill v. Colorado, 530 U.S. 703, 716-17, 120
S.Ct. 2480, 147 L.Ed.2d 597 (2000) (the right of privacy in-
cludes an unwilling listener’s interest in avoiding unwanted
communication).
The Supreme Court has repeatedly held that speech
restrictions based on private choice (i.e.--an opt-in feature)
are less restrictive than laws that prohibit speech directly. In
Rowan, for example, the Court approved a law under which
an individual could require a mailer to stop all future mailings
if he or she received advertisements that he or she believed to
be erotically arousing or sexually provocative. 397 U.S. at
729-30, 738, 90 S.Ct. 1484. Although it was the government
that empowered individuals to avoid materials they consid-
ered provocative, the Court emphasized that the mailer’s right
to communicate was circumscribed only by an affirmative act
of a householder. Jd. at 738, 90 S.Ct. 1484. “Congress has
erected a wall--or more accurately permits a citizen to erect a
wall--that no advertiser may penetrate without his acquies-
cence. .. . The asserted right of a mailer, we repeat, stops at
the outer boundary of every person’s domain.” I/d.
Likewise, in rejecting direct prohibitions of speech (even
fully protected speech), the Supreme Court has often
reasoned that an opt-in regulation would have been a less
restrictive alternative. In Martin v. City of Struthers, the
Court struck down a city ordinance prohibiting door-to- door
canvassing, noting that the government’s interest could have
23a
been achieved in a less restrictive manner by giving house-
holders the choice of whether or not to receive visitors. 319
U.S. 141, 147-49, 63 S.Ct. 862, 87 L.Ed. 1313 (1943) (“[T]he
decision as to whether disiributers of literature may lawfully
call at a home . . . belongs . . . with the homeowner himself.
A city can punish those who call at a home in defiance of the
previously expressed will of the occupant.”).'? More re-
cently, in Watchtower Bible & Tract Soc’y of N.Y., Inc. v.
Village of Stratton, the Court struck down a _ permit
requirement for door-to-door advocacy, while noting that
another section of the ordinance allowing residents to post
“No Solicitation” signs provided ample protection for the
unwilling listener. 536 U.S. 150, 153, 168-69, 122 S.Ct.
2080, 153 L.Ed.2d 205 (2002): see also Village of Schaum-
burg v. Citizens for a Better Env’t, 444 U.S. 620, 639, 100
S.Ct. 826, 63 L.Ed.2d 73 (1980) (“[T]he provision permitting
homeowners to bar solicitors from their property by posiing
signs reading ‘No Solicitors or Peddlers Invited’ suggests the
availability of less intrusive and more effective measures to
protect privacy.”) (citations omitted).
The idea that an opt-in regulation is less restrictive than a
direct prohibition of speech applies not only to traditional
door-to-door solicitation, but also to regulations seeking to
protect the privacy of the home from unwanted intrusions via
telephone, television, or the Internet. See United States v.
Playboy Entm’t Group, Inc., 529 U.S. 803, 815, 120 S.Ct.
1878, 146 L.Ed.2d 865 (2000) (opt-in targeted blocking of
offensive television programming “enables the Government
to support parental authority without affecting the First
Amendment interests of speakers and willing listeners. . . .
'? The Court in Martin suggested that one kind of regulation of home
solicitation that would pass constitutional muster would be a regulation
“which would make it an offense for any person to ring the bell of a
householder who has appropriately indicated that he is unwilling to be
disturbed.” 319 U.S. at 148, 63 S.Ct. 862.
ee re
24a
Like the do-not-mail regulation approved in Rowan, the
national do-not-call registry does not itself prohibit any
speech. Instead, it merely “permits a citizen to erect a wall
_. . that no advertiser may penetrate without his acquies-
cence.” See Rowan, 397 U.S. at 738, 90 S.Ct. 1484. Almost
by definition, the do-not-call regulations only block calls that
would constitute unwanted intrusions into the privacy of con-
sumers who have signed up for the list. Moreover, it allows
consumers who feel susceptible to telephone fraud or abuse to
ensure that most commercial callers will not have an
opportunity to victimize them. Under the circumstances we
address in this case, we conclude that the do-not-call regis-
try’s opt-in feature renders it a narrowly tailored commercial
speech regulation.
The do-not-call registry’s narrow tailoring is further dem-
onstrated by the fact that it presents both sellers and
consumers with a number of options to make and receive
sales offers. From the seller’s perspective, the do-not-call
registry restricts only one avenue by which solicitors can
communicate with consumers who have registered for the list.
In particular, the do-not-call regulations do not prevent
businesses from corresponding with potential customers by
mail or by means of advertising through other media. Cf
Florida Bar v. Went For It, Inc., 515 U.S. 618, 633-34, 115
S.Ct. 2371, 132 L.Ed.2d 541 (1995) (holding a 30-day post-
accident ban on attorney solicitations narrowly tailored,
finding it relevant that ample alternative channels for adver-
tising legal services were available).
25a
From the consumer’s perspective, the do-not-call rules
provide a number of different options allowing consumers to
dictate what telemarketing calls they wish to receive and what
calls they wish to avoid. Consumers who would like to
receive some commercia! sales calls but not others can sign
up for the national do-not-call registry but give written
permission to call to those businesses from whom they wish
to receive offers. See 16 C.F.R. § 310.4(b)(1)(iii)(B)(1);_ 47
C.F.R. § 64.1200(f)(9)(i). Alternatively, they may decline to
sign up on the national registry but make company-specific
do-not-call requests with those particular businesses from
whom they do not wish to receive calls. See 16 C.F.R.
§ 310.4(b)(1)(iii)(A);_ 47 C.F.R. § 64.1200(d)(3). Therefore,
under the current regulations, consumers choose between two
default rules--either that telemarketers may call or that they
may not. Then, consumers may make company-specific
modifications te either of these default rules as they see fit,
either granting particular sellers permission to call or block-
ing calls from certain sellers.
Finally, none of the telemarketers’ proposed alternatives
would serve the government’s interests as effectively as the
national do-not-call list. Primarily, the telemarketers suggest
that company-specific rules effectively protected consumers.
Yet as the FTC found, “[t]he record in this matte. over-
whelmingly shows the contrary . . . it shows that the com-
pany-specific approach is seriously inadequate to protect
consumers’ privacy from an abusive pattern of calls placed by
a seller or telemarketer.” 68 Fed.Reg. at 4631.
First, the company-specific approach proved to be ex-
tremely burdensome to consumers, who had to repeat their
do-not-call requests to every solicitor who called. Jd. at 4629.
In effect, this system gave solicitors one free chance to call
each consumer, although many consumers find even an initial
unsolicited sales call abusive and invasive of privacy. /d. at
4629-30; cf FCC v. Pacifica Found., 438 U.S. 726, 748-49,
26a
98 S.Ct. 3026, 57 L.Ed.2d 1073 (1978) (“To say that one may
avoid further offense by turning off the radio when he hears
indecent language is like saying that the remedy for an assault
is to run away after the first blow. One may hang up on an
indecent phone call, but that option does not . . . avoid a harm
that has already taken place.”). Second, the government’s
experience under the company-specific rules demonstrated
that commercial solicitors often ignored consumers’ requests
to be placed on their company-specific lists. 68 Fed.Reg. at
4629. Third, consumers have no way to verify whether their
numbers have been removed from a solicitor’s calling list
in response to a company-specific do-not-call request. Id.
Finally, company-specific rules are difficult to enforce be-
cause they require consumers to bear the evidentiary burden
of keeping lists detailing which telemarketers have called
them and what do-not-call requests they have made. /d.
The telemarketers’ objection that the company-specific
approach should have been more vigorously marketed to
consumers is unavailing because the flaws the FTC identified
are inherent in the company-specific rule. More consumer
education simply could not have cured the ineffectiveness of
the former system. Similarly, even if we were to agree with
the telemarketers’ argument that violations of the company-
specific list were not adequately enforced, the national
do-not-call program improves upon failures of the company-
specific approach that were not caused by any lack of
enforcement. Unlike the national registry, the company-
specific approach gave a vast number of potential solicitors
one shot at each unwilling consumer and was significantly
more difficult for consumers to use. Moreover, the national
do-not-call registry will be easier to enforce than the
company-specific rules because there will generally be no
dispute as to whether a certain telemarketer 1s prohibited from
calling a particular number.
27a
Finally, the telemarketers argue that it would have been
less restrictive to let consumers rely on technological alterna-
tives--such as caller ID, call rejection services, and electronic
devices designed to block unwanted calls. Each of these
alternatives puts the cost of avoiding unwanted tele-
marketing calls on consumers. Furthermore, as the FCC
found, “[a]lthough technology has improved to assist con-
sumers in blocking unwanted calls, it has also evolved in such
a way as to assist telemarketers in making greater numbers of
calls and even circumventing such blocking technologies.”
68 Fed.Reg. at 44147. Forcing consumers 10 compete in a
technological arms race with the telemarketing industry is not
an equally effective alternative to the do-not-call registry.
In sum, the do-not-call registry is narrowly tailored to
restrict only speech that contributes to the problems the
government seeks to redress, namely the intrusion into
personal privacy and the risk of fraud and abuse caused by
telephone calls that consumers do not welcome into their
homes. No calls are restricted unless the recipient has
affirmatively declared that he or she does not wish to receive
them. Moreover, telemarketers still have the ability to
contact consumers in other ways, and consumers have a
number of different options in determining what tele-
marketing calls they will receive. Finally, there are not
numerous and obvious less-burdensome alternatives that
would restrict less speech while accomplishing the govern-
ment’s objectives equally as well.
C. Discovery Network
As should be clear from the foregoing discussion, the
telemarketers’ reliance on Discovery Network is misplaced.
In Discovery Network, the Supreme Court applied Central
Hudson to strike down a municipal policy directly prohibiting
freestanding commercial newsracks on public property. 507
U.S. at 412, 416, 113 S.Ct. 1505. It concluded that the
regulation--which did not similarly restrict non-commercial
28a
newsracks--did not bear a reasonable fit to the city’s interests
in promoting safety and the attractive appearance of the city’s
public areas. /d. at 412, 417, 113 S.Ct. 1505. In particular,
the Court emphasized that 1) the regulation applied to only a
“minute” and “paltry” share of the total number of newsracks
in the city, id. at 418, 113 S.Ct. 1505, and 2) the regulation’s
distinction between commercial and non-commercial speech
bore “no relationship whatsoever to the particular interests
that the city has asserted.” Jd at 424, 113 S.Ct. 1505
(emphasis in original).
The trifling number of newsracks regulated in Discovery
Network suggested that the policy did not materially advance
the city’s interests, and this aspect of the regulation was not
justified by evidence demonstrating that despite their small
numbers the commercial newsracks disproportionately caused
the problems the city sought to remedy. The Court held, in
essence, that a regulation that has only a minimal impact on
the identified problem cannot be saved simply because it
targets only commercial speech, which occupies a lower
place in our First Amendment jurisprudence. The Court
concluded that the “low value” of commercial speech was “an
insufficient justification for the discrimination against
respondents’ use of newsracks that are no more harmful than
the permitted newsracks, and have only a minimal impact on
the overall number of newsracks on the city’s sidewalks.” Jd.
at 418, 113 S.Ct. 1505 (emphasis added). Under a straight-
forward application of Central Hudson, the Court struck
down the city’s newsrack ordinance because it failed directly
to advance the city’s interests.
Both of the factors the Court emphasized in Discovery
Network are absent in our case. First, while the regulation in
Discovery Network applied only to a minute and paltry
number of newsracks, the do-not-call registry blocks a
substantial amount of unwanted telemarketing calls. See
supra part III(B)(1). Second, while the distinction between
aaa
ee
29a
commercial and non-commercial speech in Discovery
. Network bore no relationship whatsoever to the city’s as
serted interests, the do-not-call registry’s commercial/non-
commercial distinction was based on findings that commer-
cial telephone solicitation was significantly more problematic
than charitable or political fundraising calls. Jd; see also
FTC v. Mainstream Mktg. Servs., Inc., 345 F.3d 850, 856-60
(10th Cir.2003). Additionally, the government had evidence
that other alternatives (company-specific restrictions) failed
in the commercial context, but had no comparable experience
involving the failure of company-specific restrictions with
respect to charitable or political callers. See supra part
I11(B)(2); 68 Fed.Reg. at 4637.
D. Summary
For the reasons discussed above, the government has
asserted substantial interests to be served by the do-not-call
registry (privacy and consumer protection), the do-not-call
registry will directly advance those interests by banning a
substantial amount of unwanted telemarketing calls, and the
regulation ‘is narrowly tailored because its opt-in feature
ensures that it does not restrict any speech directed at a
willing listener. In other words, the do-not-call registry
bears a reasonable fit with the purposes the government
sought to advance. Therefore, it is consistent with the limits
the First Amendment imposes on laws restricting commercial
speech. !?
'? Our conclusion is consistent with other circuits’ decisions approving
similar telecommunications regulations. See Missouri v. American Blast
Fax, Inc., 323 F.3d 649 (8th Cir.2003) (upholding TCPA regulation
prohibiting unsolicited commercial fax advertising); Destination Ventures,
Lid, v. FCC, 46 F.3d 54 (9th Cir.1995) (same); Moser v. FCC, 46 F.3d
970, 972-75 (9th Cir.1995) (upholding ban on prerecorded commercial
telemarketing).
30a
IV. OTHER ISSUES
The telemarketers also challenge various other aspects of
the do-not-call registry. In turn, we consider 1) whether the
fees telemarketers must pay to access the registry are consti-
tutional, 2) whether it was arbitrary and capricious for the
FCC to approve the established business relationship excep-
tion, and 3) whether the FTC had statutory authority to enact
its do-not- call rules."
A. The Do-Not-Call Registry Fees
To obtain the phone numbers of consumers who have
signed up for the national do-not-call registry, telemarketers
must pay a modest annual access fee determined by the FTC.
Currently, the fee is $25 per area code of data, except that
the first five area codes are provided free of charge and the
maximum annual fee is capped at $7,375. 16 C.F.R.
§ 310.8(c). The telemarketers argue that this fee uncon-
stitutionally imposes a revenue tax on protected speech.
We disagree.
It is well-established that the First Amendment protects
against the imposition of charges, such as a license taxes, for
the enjoyment of free speech rights. Murdock vy. Pennsyl-
vania, 319 U.S. 105, 113-14, 63 S.Ct. 870, 87 L.Ed. 1292
(1943). Nevertheless, the government is permitted to exact a
fee in order to defray the cost of legitimate regulations, even
though such a fee incidentally burdens speech. See id. at 114
‘4 The telemarketers’ challenge to the do-not-call registry fees was
raised below in case No. 03-1429, although the district court did not reach
this issue. The challenge to the FCC’s established business relationship
exception has been raised only in case No. 03-9594, in which we review
the FCC action directly. The telemarxeters’ challenge to the FTC’s
statutory authority to enact its do-not-call regulations was raised below in
case Nos. 03-1429 and 03-6258. In case No. 03-1429, the district court
declined to reach this issue; in case No. 03-6258, the district court held
that the FTC lacked statutory authority.
3la
n. 8, 63 S.Ct. 870. In Murdock, for example, the Court struck
down an ordinance that required Jehovah’s Witnesses to pay
licensing fees in order to distribute religious materials door-
to-door, explaining that the regulation was “not a nominal fee
imposed as a regulatory measure to defray the expenses of
policing the activities in question.” /d. at 106, 113-14, 63
S.Ct. 870. The Court employed the same reasoning in Cox v.
New Hampshire, upholding license fees of up to $300 to take
part in a parade or procession because the fee was held “to be
not a revenue tax, but one to meet the expense incident to the
administration of the act and to the maintenance of public
order in the matter licensed.” 312 U.S. 569, 570-71, 576-77,
61 S.Ct. 762, 85 L.Ed. 1049 (1941).
Accordingly, we recently approved the Utah Charitable
Solicitations Act--which requires charitable fundraisers to
register with the state and pay $250 for a permit--because that
fee offsets increased regulatory costs associated with the act.
American Target Adver., Inc. v. Giani, 199 F.3d 1241, 1246,
1248-49 (10th Cir.2000). We held that “a regulatory fee may
be constitutional only if it serves a ‘legitimate state interest’”
and that defraying the costs of a regulation aimed at
protecting citizens from fraud is legitimate. /d. at 1248-49.
Such fees may be imposed to defray both administrative
expenses (such as processing and licensing costs) and the cost
of enforcing the regulations. National Awareness Found. y.
Abrams, 50 F.3d 1159, 1166 (2d Cir.1995) (“[E]nforcement
power is necessary to ensure that the purposes of [the
regulations] are served.”).
The Do-Not-Call Implementation Act authorized the FTC
to collect fees for fiscal years 2003 to 2007, requiring that
“[sJuch amounts shall be available for expenditure only to
offset the costs of activities and services related to the
implementation and enforcement of the Telemarketing Sales
Rule, and other activities resulting from such implementation
and enforcement.” Pub. L. No. 108-10, 117 Stat. 557 at § 2
32a
(2003). In enacting the fees regulation, the FTC stated it was
authorized only “to assess fees sufficient to cover the costs of
implementing and enforcing the do-not-call provisions of the
Amended TSR.” Telemarketing Sales Rule Fees, 68 Fed.Reg.
45134, 45141 (July 31, 2003). The FTC estimated the costs of
implementing and enforcing the national do-not-call registry
at $18.1 million for fiscal year 2003. Jd.
The record conclusively demonstrates that the do-not-call
regisiry fees are to be used only to pay for expenses incident
‘to the administration of the do-not-call registry, as required
by Murdock and Giani. The FTC explained that the costs of
the do-not-call registry fall into three major categories. First
are the actual costs of developing and operating the national
registry, such as the costs of handling consumer registration
and complaints, transferring information from state lists to the
registry, ensuring telemarketer access to the registry, and
managing law enforcement access to appropriate information.
Id. Second are the costs of enforcement efforts, such as
domestic and international law enforcement initiatives to
identify and challenge alleged violators, and consumer
and business education efforts. /d. Third are the increased
costs of agency infrastructure and administration, includ
ing changes in information technology structural support
necessary to handle anticipated increases in consumer com-
plaints and requests from law enforcement agencies for
access to such complaints. /d. The FTC decided upon the $25
per area code fee in order to ensure that it would collect the
amount necessary to defray these costs.'°
'S First, the FTC estimated that about 10,000 telemarketing firms
would seek access to the list, and that the average telemarketer would pay
to obtain about 73 area codes of data. 68 Fed.Reg. at 45141. Under those
estimates, the expenses incident to the list would amount to about $25 per
area code provided, excluding those that would be provided free of
charge. Recognizing that its fee schedule is based on estimated figures,
the FTC also emphasized that these fees would need to be reexamined
33a
Therefore, we hold that the registry fees are a permissible
regulatory measure designed to offset projected expenses
incident to the administration and enforcement of the national
do-not-call list, not an unconstitutional revenue tax.
B. The Established Business Relationship Exception
The telemarketers next argue that the FCC’s established
business relationship exception is arbitrary and capricious in
violation of the Administrative Procedure Act. See 5 U.S.C.
§ 706. In particular, they contend that the FCC failed to give
appropriate consideration to the anti-competitive effect that
this exception may have on telecommunications markets. We
conclude that the FCC did in fact address this concern, and
that the FCC’s exception for established business relation-
ships is not arbitrary and capricious under the APA.
The arbitrary and capricious standard of review is a narrow
one, and we are not empowered to substitute our own judg-
ment for that of the administrative agency. City of Albuquer-
que v. Browner, 97 F.3d 415, 424 (10th Cir.1996). “Gener-
ally, an agency decision will be considered arbitrary and
capricious if ‘the agency had relied on factors which
Congress had not intended it to consider, entirely failed to
consider an important aspect of the problem, offered an
explanation for its decision that runs counter to the evidence
before the agency, or is so implausible that it could not be
ascribed to a difference in view or the product of agency
expertise.” Friends of the Bow v. Thompson, 124 F.3d 1210,
1215 (10th Cir.1997) (quoting Motor Vehicle Mfrs. Ass'n v.
State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct.
2856, 77 L.Ed.2d 443 (1983)).
The Telecommunications Act of 1996, 47 U.S.C. § 251 et
seq., required local telephone monopolies to make their
periodically and adjusted to reflect the FTC's actual experience in
operating the registry. /d. at 45141-42.
34a
facilities and services available to competitors for negotiated
or arbitrated prices, and directed the FCC to establish
regulations to advance local competition. The FCC enacted
its do-not-call rules under different statutory authority, the
TCPA, which specifically authorized the FCC to establish a
national database of residential telephone subscribers who
object to receiving telephone solicitations. See 47 U.S.C.
§ 227(c)(3).
When an agency is charged to enforce overlapping and
at times inconsistent policies, it cannot act single-mindedly
in furtherance of one of those policies while wholly ignoring
the other. Southern S.S. Co. v. NLRB, 316 U.S. 31, 46-47,
62 S.Ct. 886, 86 L.Ed. 1246 (1942); McLean Trucking Co.
v. United States, 321 U.S. 67, 80, 64 S.Ct. 370, 88 L.Ed.
544 (1944).
The FCC rule sufficiently addresses the telemarketers’
concerns about the established business relationship excep-
tion. In its notice of rulemaking, the FCC asked for
comments on the anti-competitive effect this exception might
have on the telecommunications industry. See 68 Fed.Reg. at
44159. The FCC received responses indicating that such an
exception would favor incumbent telephone service provide “s
who would be able to market new services to their larger
customer base. /d. at 44159-60. Also, the FCC noted some
respondents’ concerns that this anti-competitive effect would
be particularly strong because telephone solicitations are
currently the primary mechanism for selling telecommunica-
tions services. Jd. at 44159. The FCC then considered sev-
eral proposed ways in which such an anti-competitive effect
could be itigated, rejecting each of them.
First, the FCC considered a proposal to narrow the estab-
lished business relationship exemption so that no tele-
communications company could call its customers to adver-
tise different services. Jd. at 44160. However, the FCC cited
comments in its administrative record emphasizing the
35a
importance of “flexibility in communicating with
customers not only about their current services, but also to
discuss available alternative services or products.” /d
Accordingly, the FCC concluded that limiting telecom-
munications companies’ ability to market new goods or
services to existing customers would not be in the public
interest. Jd.
Second, the FCC considered a proposal that the Commis-
sion revise the definition of established business relationship
so that all »roviders of telecommunications services would be
deemed to have such a relationship with all consumers, even
if they had not in fact had any preexisting business connec-
| tions. /d. Third, it considered an alternative proposal that the
| definition of established business relationship be revised to
| exclude companies who have historically been dominant or
monopoly service providers, at least until such time as the
| new entrants to the telecommunications industry sufficiently
| penetrated the market. /d The FCC concluded that these
proposals would not adequately fulfill Congress’ mandate to
protect residential telephone subscribers’ privacy rights to
avoid telemarketing calls to which they object: “To permit
common carriers to call consumers with whom they have no
existing relationships and who have expressed a desire not to
be called by registering with the national do-not-call list,
would likely confuse consumers and interfere with their abil-
ity to manage and monitor the telemarketing calls they
receive.” Id.
The FCC then explained the factors it believed would limit
the established business relationship exception’s anti-
competitive effect. First, it noted that all providers of
telecommunications services--incumbent carriers and new
competitors alike--may contact competitors’ customers who
have not signed up for the national do-not-call registry. /d.
Second, consumers who have signed up for the do-not-call
registry still have the ability to place their carrier on a
ee
36a
company-specific do-not-call list, thereby overriding the
established business relationship exception. /d. Finally, the
FCC emphasized that telecommunications providers are still
free to use other means of marketing their products to
consumers, such as direct mailings. Id.
The FCC’s rule demonstrates that the agency did not
simply ignore the potential anti-competitive effect of the
established business relationship exception or its duties under
the Telecommunications Act. Rather, the FCC analyzed the
possible effects that this exception may have on the
telecommunications industry and explained why it believed
its rule would minimize any adverse consequences. When an
agency has made a reasoned policy decision, “we are not
empowered to substitute our judgment for that of the
fagency]” under the arbitrary and capricious standard of
review. Browner, 97 F.3d at 424. The FCC did not act in an
arbitrary and capricious manner in adopting the established
business relationship exception, and we decline the tele-
marketers’ invitation to displace the FCC’s policy judgment.
C. The FTC’s Statutory Authority
In case No. 03-6258, the district court held that the FTC
lacked statutory authority to enact the do-not-call registry. In
the Telemarketing Act, Congress authorized the FTC to
“prescribe rules prohibiting deceptive telemarketing acts or
practices and other abusive telemarketing acts or practices.”
Pub.L. 103-297, 108 Stat. 1545 at § 3. More specifically,
Congress directed the FTC to include “a requirement that
telemarketers may not undertake a pattern of unsolicited
telephone calls which the reasonable consumer would
consider coercive or abusive of such consumer’s right to
privacy.” Id. The FTC’s conclusion that this language
authorized it to enact the national do-not-call registry is
entitled to deference under the familiar test outlined in
Chevron, U.S.A., Inc. v. Natural Resources Defense Council,
467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694
37a
(1984).'® In light of this deference, we conclude that the FTC
did have statutory authority to promulgate its do-not-call
regulations because the agency’s view that the Telemarketing
Act authorized it to enact those rules is at teast a permissible
construction of that statute.
Moreover, even if some doubt once existed, Congress
erased it through subsequent legislation. See North Haven
Bd. of Educ. v. Bell, 456 U.S. 512, 535, 102 S.Ct. 1912, 72
L.Ed.2d 299 (1982) (“Where an agency’s statutory construc-
tion has been fully brought to the attention of the public and
the Congress, and the latter has not sought to alter that
interpretation although it has amended the statute in other
respects, then presumably the legislative intent has been
correctly discerned.”); Schism v. United States, 316 F.3d
1259, 1289 (Fed-Cir.2002) (“Congress may ratify agency
conduct ‘giving the force of law to official action unauthor-
ized when taken.””) (citing Swayne & Hoyt v. United States,
300 U.S. 297, 302, 57 S.Ct. 478, 81 L.Ed. 659 (1937)). In the
Do-Not-Call Implementation Act, Congress directed the FCC
and FTC to maximize consistency between their respective
do-not-call rules and authorized the FTC to collect do-not-call
registry fees to offset the administrative costs of the regula-
tions. Pub.L. 108-10, 117 Stat. 557 at §§ 2-3. Furthermore,
in response to the district court’s decision in case No.
03-6258, Congress expressly ratified the FTC’s do-not-call
regulations. An Act to Ratify the Authority of the Federal
Trade Commission to Establish a Do-Not-Call Registry,
Pub.L. 108-82, 117 Stat 1006 (2003). The FTC’s statutory
authority is now unmistakably clear.
' In reviewing an agency’s construction of a statute it administers, we
first ask whether Congress Las directly spoken to the precise question at
issue. If so. that is the end of the matter and Congress’ intent controls. If
the statute is silent or ambiguous with respect to this issue, our inquiry is
limited to whether the agency’s interpretation is a permissible
construction of the statute. Chevron, 467 U.S. at 842-43, 104 S.Ct. 2778.
38a
V. CONCLUSION
We hold that 1) the do-not-call list is a valid commercial
speech regulation under C entral Hudson because it directly
advances substantial governmental interests and is narrowly
tailored; 2) the registry fees telemarketers must pay to access
the list are a permissible measure designed to defray the cost
of legitimste government regulation; 3) it was not arbitrary
and capricious for the FCC to adopt the established business
relationship exception; and 4) the FTC has statutory authority
to establish and implement the national do-not-call registry.
The judgments belew in cases 03-1429 and 03-6258 are
REVERSED with respect to tne questions presented in this
appeal, and the petitions for review in cases 03-9571 and
03-9594 are DENIED.
ae, A RL REA REALE GARY PEN
39a
APPENDIX B
UNITED STATES COURT OF APPEALS,
TENTH CIRCUIT
[Filed Oct. 7, 2003]
No. 03-1429
FEDERAL TRADE COMMISSION; TIMOTHY J. MURIS, Chairman
of the FEDERAL TRADE COMMISSION, in his official
capacity; SHEILA F. ANTHONY, Commissioner, FEDERAL
TRADE COMMISSION, in his official capacity; MOZELLE W.
THOMPSON, Commissioner, FEDERAL TRADE COMMISSION,
in his official capacity, ORSON SWINDLE, Commissioner,
Federal Trade Commission, in his official capacity;
THOMAS B. LEARY, Commissioner, Federal Trade
Commission, in his official capacity; and J. HOWARD
BEALES III, Director, Bureau of Consumer Protection, in
his official capacity,
Petitioners,
V.
MAINSTREAM MARKETING SERVICES, INC., a Colorado corpo-
ration, TMG MARKETING, INC., a Colorado corporation;
AMERICAN TELESERVICES ASSOCIATION,
Respondents.
ORDER
Before SEYMOUR, EBEL, and HENRY, Circuit Judges.
PER CURIAM.
The Federal Trade Commission (Petitioner) (“FTC”) chal-
lenges an order of the United States District Court for the
40a
District of Colorado permanently enjoining the FTC from
implementing provisions in its amended Telemarketing Sales
Rule creating a national do-not-call list. The Rule created
a federal registry of telephone numbers of consumers who
have indicated that they do not wish to receive unsolicited
telephone cails from commercial telemarketers, and it
prohibits those telemarketers from making sales calls to
consumers on the list.’ The Federal Communications
Commission (FCC), in coordination with the FTC, has also
ordered the establishment of a national do-not-call list. The
only issue to be decided at this time is the FTC’s request for a
stay of the district court’s order pending this Court’s decision
on the merits.
I. Standard for Granting Stay
The FTC’s request for a stay is governed by Federal Rules
of Appellate Procedure 8 and 18. To obtain a stay under
these rules, the FTC must address the following factors:
(1) the likelihood of success on appeal; (2) the threat of
irreparable harm if the stay or injunction is not granted;
(3) the absence of harm to opposing parties if the stay or
injunction is granted; and (4) any risk of harm to the public
interest. Homans v. City of Albuquerque, 264 F.3d 1240,
1243 (10th Cir.2001); 10th Cir. R. 8.1.
As an initial matter, the district court suggested that an
additional inquiry overlays this Court’s analysis of whether to
grant a stay of the district court’s order pending appeal.
Specifically, it cited decisions from this Court setting out the
following types of preliminary injunctions as “disfavored”:
(1) one that disturbs the status quo; (2) one that affords the
! Commercial telemarketers are exempt from the FTC's do—not-call
prohibitions if they have received express written consent from the
consumers they call, or if they call consumers with whom they hve an
established business relationship. Telemarketing Sales Rule, 68 Fed.Reg.
4580, 4629 (Jan. 29, 2003).
4la
movant substantially all the relief the movant may recover at
the conclusion of a full trial on the merits; and (3) one that is
mandatory as opposed to prohibitory. Prairie Band of
Potawatomi Indians v. Pierce, 253 F.3d 1234, 1247 n. 4 (10th
Cir.2001); SCFC ILC, Inc. v. Visa USA, Inc., 936 F.2d 1096,
1098-99 (10th Cir.1991). The concerns arising from the first
two types of “disfavored” injunctions are relevant only in a
merits review of a preliminary injunction issued by a district
court, typically on an incomplete record. Those concerns do
not, however, constrain our decision whether to stay a lower
court’s permanent injunction issued after consideration of a
complete record.” The concern about mandatory injunctions is
not a factor in this case because a decision to stay the district
court’s permanent injunction does not constitute a judicial
mandate requiring any of the litigants to take any action. Such
a stay order would suspend an injunction, not impose one.
Therefore, we do not apply the heightened scrutiny required
for “disfavored” preliminary injunctions.
With respect to the four stay factors,’ where the moving
party has established that the thre: “harm” factors tip decid-
? When issuing a preliminary injunction, a district court typically
bases its decision on an incomplete record. See, e.g., N. Arapahoe Tribe v.
Hodel, 808 F.2d 741, 753 (10th Cir.1987). As such, there is a heightened
risk of issuing a preliminary injunction that will ultimately preve to be
inconsistent with the court’s firal adjudication on the merits, resulting in
irreparable injury to a party. Where, as here, there has been a full
adjudication on the merits by the district court and we are considering
whether to stay the district court’s permanent injunction pending appeal,
we have the benefit of a full, developed record on which to base our
decision. Thus, the concerns that would trigger heightened review in
the context of a preliminary injunction proceeding do not arise in the
context of an appeal of a permanent injunction taken after a final
judgment on the merits.
* In our evaluation of these four stay factors, we have considered, inter
alia, the enabling statutes, legislative history, FTC and FCC regulations
and agency records, the district court’s decision on the merits and its order
denying a stay pending appeal, the parties’ motions and responses filed in
this Court, and various amicus submissions.
42a
edly in its favor, the “probability of success” requirement is
somewhat relaxed. Prairie Band, 253 F.3d at 1246; Conti-
nental Oil Co. v. Frontier Ref, Co., 338 F.2d 780, 781-82
(10th Cir.1964). Under those circumstances, probability of
success is demonstrated when the petitioner seeking the stay
has raised “questions going to the merits so serious,
substantial, difficult, and doubtful as to make the issue ripe
for litigation and deserving of more deliberate investigation.”
Prairie Band, 253 F.3d at 1246-47 (internal quotations
- omitted).
We conclude that, on balance, the three “harm” factors
alone do not support a relaxed review of the probability of
success factor. Wi*h respect to the second and fourth factors—
which are necessarily conflated because the FTC’s asserted
injury is exclusively one involving the public interest-we
conclude that the public does have strong privacy and expec-
tation interests that weigh in favor of granting this stay
pending review of the merits. Yet the third factor—injury to
opposing parties if the stay is granted—weighs against
granting the stay because Respondents will likely suffer harm
if the FTC’s do—not-call regulation comes into effect and is
later determined to be unconstitutional, even though their
injury would be tempered by our granting expedited review
of this case on the merits.* Although we conclude that on
balance the harm factors tip in the FTC’s favor, those factors
do not weigh so heavily towards the FTC as to justify a
relaxed review of the final factor, likelihood of success on the
merits. Therefore, we will grant a stay only if the FTC shows
a substantial likelihood of success on the merits of its appeal.
We turn then to that analysis.
‘ Although the amended Telemarketing Sales Rule apparently would
place perhaps fifty million phones off limits, that still leaves a very large
population of phones that would be called during the time that this Court
considers the appeal on its merits, and such phones are likely to represent
more responsive potential buyers of goods and services that are marketed
by telemarketing calls.
43a
Il. Likelihood of Success on the Merits
The Supreme Court has identified a 3—step test to analyze
First Amendment challenges to restrictions applied to lawful
and non—misleading commercial speech. Regulation of such
commercial speech passes constitutional muster if (1) the
government asserts a substantial interest to be achieved by the
restrictions; (2) the restriction directly advances that govern-
mental interest; and (3) the restriction is narrowly tailored to
meet that interest. Central Hudson Gas & Elec. Corp. v. Pub.
Serv. Comm'n of N.Y., 447 U.S. 557, 566, 100 S.Ct. 2343, 65
L.Ed.2d 341 (1980). Together, the final two factors in the
Central Hudson analysis require that there be a “fit between
the legislature’s ends and the means chosen to accomplish
those ends.” United States v. Edge Broad. Co., 509 U.S. 418,
427-28, 113 S.Ct. 2696, 125 L.Ed.2d 345 (1993). The
government bears the burden of demonstrating both a sub-
stantial interest and the fit between that interest and the
challenged restriction. Utah Licensed Beverage Ass'n v.
Leavitt, 256 F.3d 1061, 1069 (10th Cir.2001). The Central
Hudson test does not require that the regulation be the least
restrictive means of achieving the interest asserted, but only
that it be narrowly tailored to meet the desired objective.
Board of Trs. of the State Univ. of N.Y. v. Fox, 492 U.S. 469,
480, 109 S.Ct. 3028, 106 L.Ed.2d 388 (1989).
For purposes of First Amendment analysis, to show a
reasonable fit the government must “demonstrate that the
harms it recites are real and that its restriction will in fact
alleviate them to a material degree.” Rubin v. Coors Brewing
Co., 514 U.S. 476, 486-87, 115 S.Ct. 1585, 131 L.Ed.2d 532
(1995). However, in response to a First Amendment
challenge to a regulation, the government is not limited in the
evidence it may use to support the asserted harms; it may
demonstrate its justification with anecdotes, history, con-
sensus, and simple common sense. Florida Bar v. Went For
It, Inc., 515 U.S. 618, 628, 115 S.Ct. 2371, 132 L.Ed.2d 541
44a
(1995). Moreover, while the fit must be reasonable and in
proportion to the interest served, it need not be a perfect fit or
the be ut. Per, 492 U.S. at 480, 109 S.Ct. 3028. “Within the
hounds of the general protection provided by the Constitution
to commercial speech, we allow room for legislative judg-
ments.” Edge Broad. Co., 509 U.S. at 434, 113 S.Ct. 2696.
We do not require “that the Government make progress on
every front before it can make progress on any front.” /d.
A. Substantial Governmental Interest
The FTC’s do-not-call list includes commercial tele-
marketers but specifically excludes calls from charitable
organizations. The FTC has asserted that this distinction
between commercial and non-commercial speech is justified
by (1) a greater risk of abusive practices associated with
commercial calls, and (2) commercial solicitation’s greater
impact on consumer privacy, based both on the greater
number of commercial calls and upon the less welcome
nature of commercial calls.° The district court found, and
5 The district court believed that the FTC admitted in its regulation that
privacy interests cannot justify a distinction between commercial and
charitable telemarketing calls. (Mem. Opinion & Order at 7.) We disagree.
Before the FTC amended its Telemarketing Sales Rule, certain
charitable organizations asked the agency not to include non—commercial
callers in any do—not~call list (neither a national do-ot—call list nor a
company-—specific do-not-call list). Although the FTC decided not to
include charitable callers in a national do—not—call list, it was unwilling to
exclude them from its company-specific do-not-call list if particular
homeowners wanted to designate them specifically. In this context, the
FTC stated that charitable callers, in addition to commercial callers, had
an effect on homeowners’ privacy, and thus should not be completely
immune from a consumer-initiated restriction. The FTC stated that “the
encroachment upon consumers’ privacy rights by unwanted solicitation
calls is not exclusive to commercial telemarketers” and it therefore
concluded that some regulation was appropriate even in the non-
commercial context, 68 Fed. Reg. 4637. However, the FTC never found
that commercial and non-commercial callers affected homeowners’
privacy interests to the same degree. Rather, it emphasized “fundamental
45a
Mainstream Marketing Services does not dispute, that these
asserted interests in preventing abusive practices and
protecting residential privacy are substantial under the first
prong of Central Hudson.
The Supreme Court has held that there is undoubtedly a
substantial governmental interest in the prevention of abusive
and coercive sales practices. See Edenfield v. Fane, 507 U.S.
761, 768-69, 113 S.Ct. 1792, 123 L.Ed.2d 543 (1993), The
prevention of intrusions upon privacy in the home is another
paradigmatic substantial governmental interest. In Rowan vy.
United States Post Office Department, the Supreme Court
held that protecting individual privacy is an important
governmental interest, especially in the context of the home.
397 U.S. 728, 90 S.Ct. 1484, 25 L.Ed.2d 736 (1970). The
Court recognized “the right of a householder to bar, by order
or notice, solicitors, hawkers, and peddlers from his
property.” /d. at 737, 90 S.Ct. 1484. “The ancient concept that
‘a man’s home is his castle’ into which ‘not even the king
may enter’ has lost none of its vitality.” /d See also
Watchtower Bible & Tract Soc'y of N.Y., Inc. v. Village of
Stratton, 536 U.S. 150, 164-65, 122 S.Ct. 2080, 153 L.Ed.2d
205 (2002) (noting that “residents’ privacy” is among
“important interests that the Village may seek to safeguard
through some form of regulation of solicitation activity”);
Frisby v. Schultz, 487 U.S. 474, 484, 108 S.Ct. 2495, 101
L.Ed.2d 420 (1988) (“The State’s interest in protecting the
well-being, tranquility, and privacy of the home is certainly
of the highest order in a free and civilized society.”)
(quotation omitted). In the context of telephone solicitations,
differences” between commercial and charitable solicitation that make
commercial callers more likely to “engage in all the things that
telemarketers are hated for.” /d Because of this distinction, the FTC
found it appropriate to subject commercial telemarketers to the national
do-not—call registry, but to regulate charitable callers only under the less
burdensome company-—specific do—not-call rules. /d.
46a
this privacy interest is not limited to the ringing of the phone,
rather, how invasive a phone call may be is also influenced by
the manner and substance of the call.
Therefore, the FTC’s justifications of preventing abusive
and coercive sales practices and protecting privacy are
substantial governmental interests. We turn now to analyzing
whether the FTC has established a likelihood of success on its
contention that the do-not-call list bears a reasonable fit with
these interests.
B. Reasonable Fit
1. Relevant Factors in Analyzing Reasonable Fit
Although a regulation may draw a line between commer-
cial and non-commercial speech, that distinction must bear a
relationship to the legitimate interests the government seeks
to achieve. City of Cincinnati v. Discovery Network, Inc., 507
U.S. 410, 424, 428, 113 S.Ct. 1505, 123 L.Ed.2d 99 (1993).
For example, a distinction between commercial and non—
commercial speech could be justified by reference to the
differing impact those categories of speech have on esthetics,
safety, privacy, or the like. In contrast, the distinction may not
be justified on a perceived “low value” of commercial speech.
Id. at 428, 113 S.Ct. 1505.
In Discovery Network, the Supreme Court struck down a
city ordinance banning freestanding commercial newsracks
on grounds that the restriction was not narrowly tailored. 507
U.S. at 412, 430, 113 S.Ct. 1505. The Court recognized that
the city had substantial interests in esthetics and safety that
were impaired by freestanding newsracks, but concluded that
there was no reasonable fit between those goals and the city’s
policy of banning only commercial newsracks while leaving
similar non-commercial newsracks undisturbed. /d. at 418,
113 S.Ct. 1505, Although the Court recognized that there may
be situations where “differential treatment of commercial and
noncommercial newsracks” could be justified by a reasonable
47a
fit with the government's interest in esthetics and safety, it
held that the government had failed to make any such
showing in that case. /d. See also Missouri v. Am. Blast Fax,
Inc., 323 F.3d 649, 655-56 (8th Cir.2003) (holding that unso-
licited commercial fax prohibition in Telephone Consumer
Protection Act was a reasonable fit with substantial govern-
mental interest of reducing costs and intrusion, because
commercial faxes are more intrusive than non-commercial
faxes).
Whether a commercial solicitation restriction meets the
“reasonable fit” test depends in part on the existence of
private choice on the part of homeowners. In Martin v. City of
Struthers, the Supreme Court struck down a city ordinance
banning door—to—door canvassing because it took the right to
decide whether to receive visitors away from the individual’s
own private choice. 319 U.S. 141, 148-49, 63 S.Ct. 862, 87
L.Ed. 1313 (1943). While recognizing the government’s
interest in protecting privacy, the Court held that the
ordinance swept too broadly because the dangers of door—to—
door canvassing easily could have been controlled by giving
the householder the right to decide whether to receive
visitors. Jd. at 144, 147-48, 63 S.Ct. 862. See also Watch-
tower Bible, 536 U.S. at 168-69, 122 S.Ct. 2080 (stating that
provision facilitating residents’ own utilization of “no
solicitation” signs was less restrictive than permit require-
ment and sufficient to further state’s privacy interest); United
States v. Playboy Entm't Group, Inc., 529 U.S. 803, 815, 120
S.Ct. 1878, 146 L.Ed.2d 865 (2000) (stating that targeted
consumer-initiated blocking is “less restrictive than banning,
and the Government cannot ban speech if targeted blocking
is a feasible and effective means of furthering its compel
ling interests”).
Rowan demonstrates that the element of private choice in
an opt-in feature is relevant for purposes of analyzing
“reasonable fit.” In Rowan, the Court upheld an opt-in do-
48a
not—mail list system in which a homeowner could require that
a commercial advertiser remove his or her name from its
mailing list if the homeowner determined in his or her “sole
discretion” that the material received was erotically arousing
or provocative. Rowan, 397 U.S. at 730, 90 S.Ct. 1484. In
finding the privacy regulation reasonable, the Court
emphasized the element of private choice, stating that the
homeowner was the “exclusive and final judge of what will
cross his threshold.” /d. at 736, 90 S.Ct. 1484.
Other courts have relied on Rowan’s analysis in finding
that similar mechanisms of private choice in solicitation
restrictions weigh in favor of finding a “reasonable fit.” See,
e.g., Anderson Vv. Treadwell, 294 F.3d 453, 462-63 (2d
Cir.2002) (noting, in its “reasonable fit” analysis, that re-
sident—activated solicitation restriction was narrowly tailored
and of the kind “endorsed by the Supreme Court in Rowan”);
Pearson v. Edgar, 153 F.3d 397, 404 (7th Cir.1998)
(invalidating solicitation restriction as lacking “reasonable
fit” because, unlike Rowan, “[h]Jere, the state, not the
homeowner, has made the distinction between real estate
solicitations and other solicitations without a logical privacy—
based reason’).
In sum, a regulation drawing a line between commercial
and non-commercial speech must have a reasonable fit
with substantial governmental interests. The “reasonable fit”
analysis will at least partially depend upon whether the
initiation of the solicitation restriction is at the hands of
private citizens or the government. Additionally, we will
consider the extent to which the regulatory scheme will
materially advance the governmental interest, see Discovery
Network, 507 U.S. at 418, 113 S.Ct. 1505, and the disparity in
treatment between commercial and non-commercial speech.
49a
2. The FTC’s Record Evidence Supporting a Reasonable
Fit Between the National Do-Not-Call List and _ its
Asserted Justifications
In light of the above legal standards, we must review the
record to determine the FTC’s asserted rationales for applying
its national do—not-call restrictions only to commercial sales
calls, and the evidence to support those rationales. Here, the
FTC attempts to justify this distinction by showing that
commercial telemarketing is more abusive and coercive than
charitable telemarketing and constitutes a greater intrusion
upon consumer privacy. We are mindful that these rationales
overlap to some extent.
In reviewing the FTC’s rationales for its amended rules and
the evidence in support of those rationales, it is important to
keep in mind that the myriad of statutes, legislative history,
and administrative rules addressing federal telemarketiag
regulation are largely interconnected and involve both the
FCC and the FTC. Instead of repeating factual findings and
policy rationales in each separate enactment, the FTC and
FCC have often incorporated those findings by cross—
reference. For instance, in creating a company-specific do—
not—call list applicable only to commercial telemarketers in
the original Telemarketing Sales Rule (which the FTC
enacted pursuant to the Telemarketing and Consumer Fraud
and Abuse Prevention Act, or “TCFPA”), the FTC “con-
sidered, among other things, the approach taken by Congress
and the FCC in the TCPA and its implementing regulations.”®
Telemarketing Sales Rule, 68 Fed. Reg. 4580, 4591 (Jan. 29,
2003). See also FCC Rules and Regulations Implementing the
Telephone Consumer Protection Act (TCPA) of 1991, 68
Fed. Reg. 44144, 44145 (July 25, 2003) (“[W]e agree with
the vast majority of consumers in this proceeding and the
FTC that a national do-not-call registry is necessary to
° The TCPA is the Telephone Consumer Protection Act of 1991.
50a
enhance the privacy interests of those consumers that do not
wish to receive telephone solicitations.”); De—Not—Call
Implementation Act, Pub. L. 108-10 at § 3 (Mar. 11, 2003)
(“In issuing such rule, the Federal Communications Com-
mission shall consult and coordinate with the Federal Trade
Commission to maximize consistency with the rule pro-
mulgated by the Federal Trade Commission.”). Therefore, we
must examine each of these interrelated telemarketing
enactments in evaluating the asserted justifications for the
FTC’s distinction between commercial speech and non—
commercial speech. We briefly discuss here the most relevant
of these acts and regulations.
a. Telephone Consumer Protection Act (TCPA)
In the TCPA, Congress found that unrestricted telemar-
keting can be an intrusive invasion of privacy and that many
consumers are outraged by the proliferation of intrusive calls
to their homes from telemarketers. Pub.L. 102-243 at § 2
(Dec. 20, 1991). Therefore, Congress in the TCPA authorized
the FCC to establish a national database of residential
subscribers who object to receiving “telephone solicitations.”
Id. at § 3. A “telephone solicitatior” was defined as a “tele-
phone call or message for the purpose of encouraging the
purchase or rental of, or investment in, property, goods, or
services,” excluding, inter alia, calls from a tax exempt
nonprofit organization. /d. This definition excluded charitable
telemarketers.
According to the legislative history accompanying the
TCPA, “the record suggests that most unwanted telephone
solicitations are commercial in nature. Complaint statistics
show that unwanted commercial calls are a far bigger
problem than unsolicited calls from political or charitable
organizations.” H.R.Rep. No. 102-317, at 16 (1991). The
House Report cited statistical data from several states
reporting that consumer complaints were directed mostly at
commercial saics calls. Jd) Moreover, the Committee found
=<
| Sla
that non-commercial calls were less intrusive to consumers
because they are more expected and because there is a lower
; volume of non-commercial calls. /d. It concluded that “the
two main sources of consumer problems—high volume of
solicitations and unexpected solicitations—are not present in
solicitations by nonprofit organizations . . . . It is on this basis
that the Committee believes that the scope of the regulation is
a workable ‘commercial speech’ distinction consistent with
Supreme Court precedent.” /d. at 16-17. This distinction
between commercial and non—commercial telemarketing,
justified in the TCPA, persists in all subsequent legislation
and administrative rules regulating telemarketing calls.
b. Telemarketing and Consumer Fraud and Abuse
Prevention Act (TCFPA)
In the TCFPA, Congress directed the FTC to prescribe
rules prohibiting deceptive and abusive telemarketing acts
and practices, including calls that a reasonable consumer
would consider coercive or abusive of such consumer’s right
to privacy. Pub. L. 103-297 at § 3 (Aug. 16, 1994). Congress
found that consumers lose an estimated $40 billion each year
in “telemarketing” fraud and are victimized by other forms of
“telemarketing” deception and abuse. /d. at § 2. Significantly,
: Congress in the TCFPA defined the term “telemarketing” as
calls “conducted to induce purchases of goods or services,”—
e.g., commercial calls. /d. at § 7. This is the Act under which
the FTC enacted the national do—not-call regulations |
challenged in this case.
eS ee
c. 1995 Telemarketing Sales Rule
In 1995, acting pursuant to the TCFPA, the FTC
established a company-snecific do—not-cail provision, which
prohibited telemarketers from making sales calls to persons
who had previously stated their desire not to receive such
calls from that solicitor. Telemarketing Sales Rule, 60 Fed.
: Reg. 43842, 43854-55. This rule did not apply to an entity
52a
such as a charitable organization that was not “organized to
carry on business for its own profit or that of its members.”
Id at 43843 n. 14. Accordingly, the distinction between
commercial and non-commercial speech, first enacted in the
TCPA, was present in the initial FTC Telemarketing Sales
Rule. In justifying this rule, the FTC relied in part on the
TCFPA and its legislative history, which emphasized that
sellers of goods and services regularly subjected consumers to
deception and abuse infringing upon their privacy rights. Jd.
at 43842. Moreover, the FTC later explained that when
enacting this original Telemarketing Sales Rule it also
considered the TCPA (which as noted above explicitly drew a
distinction between commercial and non-commercial solici-
tations in its legislative history) and related FCC action. 68
Fed. Reg. at 4591.
d. 2003 Amended Telemarketing Sales Rule
In its amended Rule (the subject of the instant litigation),
the ETC established a national do-not-call registry that
allowed individuals to block all commercial sales calls, with
certain exceptions. 68 Fed. Reg. 4580, 4629. Most signifi-
cantly to this case, the FTC preserved the distinction between
commercial and non-commercial calls by limiting “coverage
of the national registry to telemarketing calls made by or on
behalf of sellers of goods or services, thus exempting
telemarketing calls on behalf of charitable organizations.” Jd.
The “sellers of goods or services” limit relates back to Con-
gress’ findings in the TCFPA, which had documented a his-
tory of abuses specifically committed by telemarketers selling
goods or services.
Importantly, the amended FTC Telemarketing Sales Rule
did subject charitable organizations to the company-specific
do-not-call provision. /d. In this amended Rule, the FTC
retained the basic distinction between commercial and non—
commercial calls already present in the earlier version of the
Eee
53a
Telemarketing Sales Rule, although the amended rule resulted
in stricter requirements for both categories of calls.
The FTC found that the original Rule’s company-specific
do—not-call list was inadequate to prevent the type of abusive
commercial sales calls it was intended to prohibit. /d. at 4629,
4631. The FTC concluded that “[T]he registry is . . . designed
to cure the inadequacies as a privacy protection measure that
became apparent in the company-specific ‘do—not-—call’ pro-
visions included in the original Rule.” Jd at 4635. For
example, the FTC referred to complaints that commercial
telemarketers ignored consumers’ repeated requests to be
placed on company-specific do—not-call lists. /d. at 4629.’ It
concluded that the national do—not-call list will alsc prevent
fraud or abuse in some cases by protecting vulnerable con-
sumers from exploitative telemarketers. /d. at 4635, n. 669.
Furthermore, the FTC specifically found that “fundamental
differences between commercial solicitations and charitable
solicitations may confer upon the company-specific ‘do—not-
call’ requirements a greater measure of success with respect
to preventing a pattern of abusive calls from a fundraiser to
a consumer than it was able to produce in the context of
commercial fundraising.” Jd. at 4637. Specifically, it rea-
soned that in an advocacy call, such as a charitable
solicitation, a significant purpose of the call is to “sell” a
"It is true that the FTC did not have comparable experience regarding
whether a company-specific do—not—call list would be ineffective as to
charitable callers because up to that point in time charitable callers had not
been subjected to a company-specific do-not-call list. However, the fact
that the FTC did not yet have a record as to the need to include charitable
callers on a national do—not-call list does not mean that it could not at
least address the problem as to which it did have an adequate record—that
the more limited company-specific do—not—call list was ineffective to
prevent invasions of privacy and abusive practices among commercial
solicitors. United States v. Edge Broad. Co., 509 U.S. at 434, 113 S.Ct.
2696 (noting the government is not required “to make progress on every
front before it can make progress on any front”).
54a
cause, not simply to receive a donation. Therefore, the FTC
found that it would be self-defeating for a non—commercial
caller to engage in abusive telemarketing practices that invade
personal privacy because such conduct could alienate the
recipient against the cause the caller was attempting to
promote. /d. “When a pure commercial transaction is at stake,
callers have an incentive to engage in all the things that
telemarketers are hated for. But non-commercial speech is a
different matter.” Jd. In enacting these provisions, the FTC
cited both the TCFPA and the TCPA, noting that “Congress
knowingly put the FTC on the same path thai the FCC had
trod.” /d. at 4638.
e. 2003 FCC Rules and Regulations
Finally, in July 2003, the FCC enacted regulations to
“establish, with the Federal Trade Commission (FTC) a
national do—not—call registry.” 68 Fed. Reg. at 44144. Similar
to the FTC’s do—not-call regulations, the FCC list was not
designed to apply to charitable callers. Citing the legislative
history to the TCPA (which, as noted before, contained a
congressional justification for distinguishing between com-
mercial and non-commercial cails), the FCC reaffirmed that
most unwanted telephone solicitations are commercial in
nature and that charitable calls are less intrusive to
consumers. /d. at 44153. The FCC rule also provided for a
company-specific do—not-call system for consumers who
elect not to register for the national list. /d. at 44155.
f. Summary
Congress expressly made factual findings in the TCFPA
that telemarketing calls “conducted to induce purchases of
goods or services” have subjected consumers to substantial
fraud, deception, and abuse. Pub. L. 103— 297 at §§ : Tame &
Consequently, in enacting a national! do—not-call registry, the
FTC “decided to limit coverage of the national registry to
telemarketing calls made by or on behalf of sellers of goods
55a
or services.” 68 Fed.Reg. 4629. Furthermore, the FTC’s re-
vised Telemarketing Sales Rule states that the agency relied
on TCPA and FCC authority when it initially endorsed the
distinction between commercial and non-commercial calls.
Id. at 4591. The legislative history accompanying the TCPA,
citing complaint statistics, found that commercial telemar-
keting intru’e~s upon personal privacy more than non-
commercial teiemarketing.
3. The FTC’s Likelihood of Success
In light of this record, it appears that the FTC is likely to
succeed on its argument that the distinction in the Amended
Telemarketing Sales Rule between commercial and non—
commercial phone solicitation passes muster under Central
Hudson’s reasonable fit analysis. The line between these two
types of speech is not drawn solely on the basis of the lesser
degree of scrutiny applied to commercial speech. See
Discovery Network, 507 U.S. at 428, 113 S.Ct. 1505. Rather,
we examine the constitutionality of the distinction under the
Central Hudson test with reference to the substantial
governmental interest in preventing the greater risk of privacy
invasion and abusive sales practices correlated with
commercial telemarketing.
We find it relevant that the national do—not-call list is of an
opt-in nature, which provides an element of private choice
and thus weighs in favor of a reasonable fit. The list is not
invoked until the homeowner makes a private decision to
invoke it. See Rowan, 397 U.S. at 737, 90 S.Ct. 1484;
Playboy Entm't Group, 529 U.S. at 815, 120 S.Ct. 1878. We
also find it relevant that the FTC has not exempted non—
commercial speech totally from ali regulation, as consumers
are also given some mechanism to block non-commercial
solicitations by means of company-specific objections to
solicitations by charitable organizations. And it is permissible
for the FTC to act now to fix a problem upon which it has
record support (the inadequacy of company-specific do—not-
56a
call lists to prevent invasion of privacy and abusive practices
in the context of commercial calls) without waiting until it
can develop experience on whether or not a company—
specific do—not-call list will be effective to prevent such
abuses in the context of non-commercial telemarketing.
Edge Broad. Co., 509 U.S. at 434, 113 S.Ct. 2696. Finally,
this is not a regulatory scheme that will only affect a
“minute” porion of the problematic speech because the
great majority of all telemarketing calls—and therefore the
preponderant source of the problem of invasion of privacy
and abusive calls—are commercial calls which are covered
by the FTC’s rule. See Discovery Network, 507 U.S. at
418, 113 S.Ct. 1505.
In the context of analyzing whether to stay the district
court’s injunction, we conclude there is a substantial like-
lihood that the FTC will be able to show a reasonable fit
between the substantial governmental interests it asserted and
the national do—not-call list or, in other words, that the list
directly advances the government’s substantial interests and
is narrowly tailored. See Central Hudson, 447 U.S. at 566,
100 S.Ct. 2343.
III. Conclusion
In light of our conclusions as to the three harm factors
addressed above, we will stay the district court’s order only if
the FTC shows substantial likelihood of success on the
merits. After reviewing the record and the parties’ submis-
sions, we are satisfied the FTC has met its burden.
We ORDER the district court’s permanent injunction
preventing implementation of the FTC’s national do—not-call
list stayed pending final resolution of this appeal on the
merits. We further ORDER that the petition for review on the
merits be expedited. The FTC shall file its opening brief on
October 17. Mainstream Marketing shall file its responsive
PECL TRe BOP ey Be see
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57a
brief on October 31. The FTC shall file any reply on
November 7. Oral argument wiil be held in Tulsa, Oklahoma,
on November 10, 2003.°
* We also GRANT the states’ September 30 motion for leave to file a
brief as amici and the additional states’ October | motion to join the amici
brief.
58a
APPENDIX C
UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT
No. 03-9571
MAINSTREAM MARKETING SERVICES, INC., a Colorado
corporation; TMG MARKETING, INC., a Colorado corporation;
AMERICAN TELESERVICES ASSOCIATION,
Petitioners,
V.
FEDERAL COMMUNICATIONS COMMISSION,
Respondent.
ORDER
Filed September 26, 2003
Before SEYMOUR, EBEL and HENRY, Circuit Judges.
PER CURIAM.
Petitioners seek review of an order of the Federal
Communications Commission (FCC) adopting rules and
regulations implementing the Telephone Consumer Protec-
tion Act of 1991 (TCPA). See Rules and Regulations
Implementing the Telephone Consumer Protection Act of
1991, 68 Fed. Reg. 44144 (2003). Jurisdiction over this
petition for review is vested in the federal court of appeals. 28
U.S.C. § 2342(1) (1994). Venue is appropriate in either the
judicial circuit in which the petitioner resides or has its
principal office, or in the United States Court of Appeals for
the District of Columbia Circuit. Jd. § 2343. Petitioners have
59a
their principal office in Denver, Colorado, and venue is
therefore appropriate in this court.
The only issue to be decided at this time is petitioners’
request for a stay of certain provisions of the FCC’s order
pending review of the order on the merits. The order is
scheduled to go into effect on October 1, 2003. Petitioners’
request for stay is governed by Federal Rules of Appellate
Procedure 8 and 18. To obtain a stay under these rules,
petitioners must address the following four factors: (a) the
likelihood of success on appeal; (b) the threat of irreparable
harm if the stay is not granted; (c) the absence of harm to
opposing parties; and (d) the risk of harm to the public
interest. See, e.g., Spain v. Podrebarac, 68 F.3d 1246, 1247
(10th Cir. 1995); 10th Cir. R. 8.1.
Where the moving party has established the three “harr1”
factors, the “probability of success” requirement is relaxed
somewhat. See Lundgrin v. Claytor, 619 F.2d 61, 63 (10th
Cir. 1989). Under those circumstances, probability of success
is demonstrated when the petitioner seeking the stay has
raised questions going to the merits so serious, substantial,
difficult and doubtful, as to make the issues ripe for litigation
and deserving of more deliberate investigation.” McClendon
v. City of Albuquerque, 79 F.3d 1014, 1020 (14th Or. 1996)
(quotation omitted).
We conclude, first, that petitioners have established they
will suffer irreparable injury if a stay is not granted. The
remaining two harm factors are conflated in this instance
because the FCC is a governmental agency charged with
protecting the public interest. We conclude that petitioners
have failed to meet their burden on these remaining two
factors, for two reasons. First, the public interest in respecting
“residential privacy” weighs against a stay of the FCC’s
order. See, e.g., Frisby v. Schultz, 487 U.S. 474, 484 (1988);
Rowan v. United States Post Office Dep't, 397 U.S. 728, 737
(1970). Second, the strong expectation interest of the many
60a
millions of Americans who have registered with the FCC’s
“do not call” list weighs in favor of denying the stay.
Since petitioners have failed to establish that each of the
harm factors tilts in their favor, they are required to show a
substantial likelihood of success on the merits of their
petition. On the record presented, we conclude that petitioners
have failed to establish a substantial likelihood of success on
the merits, and we therefore DENY the motion for stay of the
FCC’s order pending review of the merits.
The panel further orders that the petition for review on the
merits be expedited, and that oral argument be scheduled on
the petition at the earliest practical time. The clerk of this
court is directed to establish a briefing and oral argument
schedule consistent with this order to expedite the petition
for review.
Entered for the Court
PATRICK FISHER, Clerk of Court
6la
APPENDIX D
UNITED STATES DISTRICT COURT,
D. COLORADO
[Filed Sept. 29, 2003]
No. CIV.A.03-N-184 (MJW)
MAINSTREAM MARKETING SERVICES, INC., a Colorado
corporation; TMG MARKETING, INC., a Colorado corporation;
and AMERICAN TELESERVICES ASSOCIATION,
Plaintiffs,
Vv.
FEDERAL TRADE COMMISSION
Defendant.
ORDER DENYING STAY OF JUDGMENT
NOTTINGHAM, District Judge.
This matter is before the court on “Defendant Federal
Trade Commission’s Motion for an Emergency Stay Pending
Appeal,” filed September 26, 2003. The motion asks this
court to stay its order and judgment enjoining the FTC from
enforcing its amended Rules (issued in December 2002)
establishing and implementing a national do—not—call registry .
applicable to commercial telemarketers on October 1, 2003.
See Mem. Op. & Order (D.Colo. Sept. 25, 2003) (hereinafter
abbreviated as “Order”). The FTC simultaneously filed a
Notice of Appeal from the Order and judgment. Procedurally,
therefore, the matter is controlled by rule 62(c) of the Federal
' Rules of Civil Procedure, which provides, in pertinent part,
as follows:
When an appeal is taken from [a] . . . final judgment
granting .. . an injunction, the court in its discretion may
62a
suspend . . . [or] modify . . . an injunction during the
pendency of the appeal upon such terms as to bond or
otherwise as it considers proper for the security of the
rights of the adverse party.
Since an agency of the United States has taken this appeal,
however, “no bond, obligation, or other security shall be
required from the appellant.” Fed.R.Civ.P. 62(e).
In order to obtain a stay of aa injunction pursuant to rule
62(c), the FTC, as the applicant, must persuade the court on
the following issues:
(1) whether the stay applicant has made a strong
showing that [it] is likely to succeed on the merits;
(2) whether the applicant will be irreparably injured
absent a stay; (3) whether issuance of the stay will
substantially injure the other parties interested in the
proceeding; and (4) where the public interest lies.
Hilton v. Braunskill, 481 U.S. 770, 776-77, 107 S.Ct. 2115,
95 L.Ed.2d 724 (1987); McClendon v. City of Albuquerque,
79 F.3d 1014, 1020-1021 (10th Cir.1996) (citing standard for
preliminary injunction as applicable in evaluating motion to
stay pending appeal); Reserve Mining Co. v. United States,
498 F.2d 1073, 1077 (8th Cir.1974). The court will momen-
tarily address each issue, although not in the numerical order
enumerated in Hilton.
As a preliminary matter, it is pertinent to note that the
purpose of a stay is to preserve the status quo pending appeal.
McClendon v. City of Albuquerque, 79 F.3d 1014, 1020-1021
(10th Cir.1996) (citing standard for preliminary injunction as
applicable in evaluating motion to stay pending appeal).
There are three types of stays that are generally disfavored:
(1) those that afford the moving party substantially all the
relief it might recover after appeal on the merits, (2) those
that disturb the status quo, and (3) those that are mandatory as
opposed to prohibitory. Prairie Band of Potawatomi Indians
v. Pierce, 253 F.3d 1234, 1247 n. 4 (10th Cir.2001) (applying
63a
standard to issuance of preliminary injunction). These types
of disfavored stays should not be granted unless the four
factors weigh heavily and compellingly in favor of the stay.
Dominion Video Satellite, Inc. v. EchoStar Satellite Corp.,
269 F.3d 1149, 1154-55 (10th Cir.2001) (applying standard
to issuance of preliminary injunction).
Here, the proposed stay would (1) afford the FTC all of the
relief it would recover after appeal, (2) disturb the status quo,
and (3) mandate that telemarketers comply with the do—not-—
call registry. If the Order is stayed, the FTC do—not-call
registry will go into effect on October 1, 2003, and require
telemarketers to pay fees for access to the registry. Tele-
marketers will be prohibited from calling telephone numbers
on the list, which may result in significant lay offs of
employees in the industry. This result gives the FTC all the
relief it seeks on appeal. Additionally, this result disturbs the
Status quo and is mandatory because it requires telemarketers
to abide by new rules that add significant regulatory burdens
to the practice of telemarketing. Accordingly, the court
concludes that the FTC must show that the four factors weigh
heavily in favor of a stay of the Order pending appeal.
1. WOULD A STAY OF THE INJUNCTION SUBSTAN-
TIALLY INJURE OTHER PARTIES INTERESTED IN THE
PROCEEDING?
If the injunction is stayed and the FTC implements the do—
not-call registry, as scheduled, on October 1, 2003, plaintiffs
and other similarly—situated commercial telemarketers will
effectively be prohibited from calling any number appearing
on the registry. Plaintiffs identify two categories of injury
which this prohibition will entail. First, it indisputably curtails
their first amendment freedom to engage in commercial
speech. This circumstance, standing alone, constitutes sub-
stantial and irreparable injury. “The loss of First Amendment
freedoms, for even minimal periods of time. unquestionably
constitutes irreparable injury.” Elrod v. Burns, 427 U.S. 347,
64a
373, 96 S.Ct. 2673, 49 L.Ed.2d 547 (1976), quoting New York
Times Co. v. United States, 403 U.S. 713, 91 S.Ct. 2140, 29
L.Ed.2d 822 (1971); ACLU v. Johnson, 194 F.3d 1149, 1163
(10th Cir.1999); Gay Lesbian Bisexual Alliance v. Sessions,
917 F.Supp. 1558, 1563 (M.D.Ala.1996).
The court must also consider a second category of injury
alleged by plaintiffs. They contend that they and their
employees will meet with concrete, significant economic
harm if the court stays its injunction and allows the FTC ‘o
effect the do—not-call registry. Charitable groups seeking
exemption from the do-not-call registry submitted opinion
proof to the FTC that their potential donor pool would be
reduced by forty to fifty percent if the registry applied to
them. 68 Fed.Reg. 4634. This court, in its order of September
25, 2003, accepted an estimate that forty to sixty percent of
telemarketing calls would be affected by the do-not-call
registry. Mem. Op. & Ord., slip op. at 7, n.1. It is reasonable
to believe that reductions of this magnitude would probably
cause a corresponding loss of, business to the industry and
loss of jobs held by persons currently occupied in making the
calls. Such monetary loss wiil never be remedied by an award
of money damages, because the FTC cannot be ordered to
post a bond, and plaintiffs’ chances of prevailing in a
damages lawsuit against the FTC for violating their constitu-
tional rights appear minuscule, at best.
Although plaintiffs purport to quantify the loss by claiming
that two million jobs will be lost, the court finds nothing in
the record which justifies this specific inference. The court,
however, must also evaluate plaintiffs’ contention against
what the FTC has offered in response—nothing. More
importantly, the FTC cannot gainsay the general proposition
that these plaintiffs, their employees, and other commercial
telemarketers will suffer substantial economic injury if the
FTC implements the do-—not-call list, because it cannot
65a
square such a denial with its current’ claim that the registry
will curtail eighty percent of unwanted telemarketing calls
currently received by consumers. A preponderance of the
evidence before the court shows that these plaintiffs, other
similarly—situated commercial telemarketers, and persons
employed by them will likely suffer devastating layoffs and
other economic loss if the FTC impiements the amended
Rules as scheduled. There is no reason on this record to infer
that employees can mitigate this loss by going to work for the
charitable organizations and other groups exempted from the
amended Rules. Moreover, because of the degree and nature
of the probable injury, it will be difficult for plaintiffs to re-
establish the status quo ante if the court allows the amended
Rules to take effect, and appellate courts ultimately uphoid
the substance of this court’s ruling, however inconceivable
this outcome might be to the FTC and its supporters. It is
unlikely, in such an event, that commercial telemarketers and
their employees could simply re—group, dust themselves off,
and proceed as they were before October 1, 2003.
2. WILL THE FTC SUFFER IRREPARABLE INJURY IF
THE COURT WERE TO DENY THE MOTION TO STAY
THE INJUNCTION?
The court concludes that the FTC itself will suffer no
injury if the court refuses to stay its injunviion, and the FTC
does not argue to the contrary. Instead, it points to the
'The FTC’s estimate concerning the number of telemarketing calls
which would be curtailed by the do—not-call list has crescendoed through
the course of this lawsuit and taken on a life of its own with no reference
to the factual record. The current eighty—percent estimate appears in the
FTC’s brief supporting its motion to stay. It appears that the estimate is
an amalgam derived by assuming that the do—not-call registry would be
applied to entities covered both by the Federal Communications
Commission and by the FTC. There is nothing whatsoever in the
administrative record or the record before this court, beyond the FTC’s
ipse dixit, to support this amalgam. The court thus rejects it.
66a
probability that, if it is enjoined from implementing the
registry, plaintiffs and others will continue to invade the
residential privacy of the millions of persons who have
indicated a preference for protecting that privacy by placing
their numbers on the do—not-call registry. It is not clear to the
court whether this question should be taken up here or in its
consideration of where the public interest lies. Finding no
helpful case law, the court will consider it here. The court has
already stated, in the Order filed September 25, 2003, that
“t]he government’s interest in protecting the well-being,
tranquility, and privacy of the home is of the highest order in
a free and civilized society.” Weighing that interest and
comparing it to the substantial and irreparable injury which
plaintiffs will suffer if the court’s injunction were stayed
requires the court to determine and characterize the intrusion
on residential privacy at issue in this case.
The intrusion upon residential privacy at issue here is the
ringing of a telephone. That ringing may be more frequent
than the consumer would like. It may come at times which are
inconvenient. It may be disruptive. Unlike junk mail or
electronic spam, it cannot be dealt with at a time chosen by
the recipient. It is invariably unwanted and adds to the stress
of daily life. It is difficult to conceive, however, how it does
economic damage or inflicts physical injury. The intrusion on
residential privacy here is properly regarded as severe,
vexatious annoyance and inconvenience—nothing more and
nothing less.
It is also important that there are ways of limiting the
intrusion even if there is delay in implementing the federal
registry while the issues are on appellate review. The parties
agree that, as of August 2002, twenty-seven states had no—
call lists similar to the registry proposed by the FTC. See 68
Fed.Reg. 4630. While this may be no comfort to persons in
states without such regulations, there is no basis to believe
that existing system of regulation will collapse while the
issues are being resolved by appellate courts.
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67a
Similarly, all other telemarketing rules promulgated by the
FTC remain in effect, including the company-specific do—
noi--call rules. As the FTC has succinctly stated on its home
page’ (http://www fic. gov):
* Consumers who don’t want to receive telemarketing
calls can limit them by telling companies to put their
number on the company’s do not call list. Write down
the name of the company and the date that you asked to
be put on its do not call list. You should not receive
further calls from that company. This provision of the
Telemarketing Sales Rule is still in force (as are all non—
do-call [sic] provisions of the Rule). The FTC and its
state partners are committed to enforcing the company—
specific provisions of the Rule.
* The company-specific do not call rules apply to all
telemarketing calls.
Finally, if the FTC’s suggestions are unavailing, the annoy-
ance and inconvenience of this telephonic intrusion can be
reciprocated or countered by a range of perfectly—legal
actions best characterized under the rubric “self-help.” These
actions, many of which should be so obvious as to require no
enumeration, are limited largely by the recipient’s imagi-
nation and the degree of civility or courtesy by which with
which any recipient feels constrained (which, the court has
reason to believe, may not be much). Undoubtedly, none of
these actions can compare to the breathtaking ease of elimi-
nating telephonic intrusions (by commercial telemarketers,
only) with the fell stroke of enlisting on the do—not-cail
registry, but they underscore the point that the type of injuries
advanced by the FTC in support of the motion to stay are
simply not irreparable and cannot be compared to the eco-
nomic and first amendment injuries on the other side of the
> Because of the impermanence and malleability of information
appearing on web sites, the court has extracted the FTC’s home page as it
existed on September 26, 2003 and attached it to this order, for the record.
68a
scale. Moreover, in contrast to the economic injuries posited
by plaintiffs and discussed above, injuries sustained because
of a wrongly-entered injunction will promptly end if and
when appellate review establishes the wrongfulness of the
injunction and the FTC implements the do—not-call registry.”
3. HAS THE FTC SHOWN THAT THE PUBLIC
INTEREST WOULD BE HARMED WERE THE COURT
TO DENY THE MOTION TO STAY THE INJUNCTION?
According to the FTC, the “public interest” here consists of
the strong expectation on the part of “[t]ens of millions of
consumers,” who have already placed their names and
numbers on the do—not-call registry, that this would “put a
halt to the dinnertime din of unwanted telemarketing.” This is
recognized to be important, and nothing this court has done
should be viewed as denigrating this expectation. Placing to
one side the demonstrably false and patently illogical premise
that prohibiting calls from only commercial telemarketers
will “halt” unwanted calls from the other telemarketers and
other mass callers exempted from regulation by the FTC, the
FTC’s view of the public interest is too short-sighted and
ephemeral. Something more is at stake here. It is appropriate
to recall words written by James Madison (characterized in
countless civics books as the Father of the Constitution) in
marking “where the public interest lies.” Hilton, 481 U.S. at
776, 107 S.Ct. 2113.
In Federalist No. 51, Madison wrote:
It is of great importance in a republic not only to guard
the society against the oppression of its rulers, but to
>The court notes the United States Court of Appeals for the Tenth
Circuit has ordered, in a parallel case brought by these plaintiffs against
the Federal Communications Commission, “that the petition for review on
the merits be expedited, and that oral argument be scheduled on the
petition at the earliest practical time.” Mainstream Marketing Services,
Inc. v. FCC, Case No. 03-9571, slip op. at 3 (10th Cir. Sept. 26, 2003).
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69a
guard one part of the society against the injustice of the
other part. Different interests necessarily exist in differ-
ent classes of citizens. If a majority be united by
a common interest, the rights of the minority will
be insecure.
The Federalist Papers, No. 51, at 323-24 (New American
Library ed.1961). Freedom of speech, no matter how unpop-
ular or disagreeable the message, is a right of every minority
(including telemarketers), no matter how strong the
majority’s clamor for limitation or restriction. In the court’s
view, the public interest, rightly understood, lies in vigilantly
prohibiting governmental rules which burden one type of
speech, but not others, when the evil which the rule maker
purports to address is as likely to be caused by the favored
speech as by the burdened speech, or when the rule maker
burdens one type of speech but not others because it is
expedient, politically—-possible, or popular to do so. The
public interest, including the interest of the millions who have
coalesced to join the do—not-—call registry, is served in the
long run by enjoining such rules if the government has not
drawn the line properly. Conversely, that public interest
would be harmed beyond measure were the court to acquiesce
in the FTC’s constricted, majoritarian view of the matter.
4. HAS THE FTC MADE A STRONG SHOWING THAT IT
IS LIKELY TO SUCCEED ON THE MERITS OF ITS
APPEAL?
The FTC concedes that the court properly chose to apply
the constitutional analysis set forth in Central Hudson to
evaluate the constitutionality of the FTC’s registry under the
First Amendment. Under Central Hudson, truthful commer-
cial speech concerning lawful activity may be regulated if: (1)
the government asserts a substantial interest in support of the
regulation; (2) the government demonstrates that the restric-
tion on commercial speech directly and materially advances
that interest; and (3) the regulation is narrowly tailored.
70a
Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n
of N.Y., 447 U.S. 557, 564-565, 100 S.Ct. 2343, 2351, 65
L.Ed.2d 341 (1980); Florida Bar v. Went For It, Inc., 515
U.S. 618, 624, 115 S.Ct. 2371, 2376, 132 L.Ed.2d 541
(1995). According to the FTC, although the court properly
found a substantial government interest in protecting
consumer privacy in the home, the court improperly
evaluated whether the registry materially advances the FTC’s
interest in protecting this privacy. (/d.)
In its Order, the court found that the registry fails to
materially advance the FTC’s interest in consumer privacy
because it only applies to commercial telemarketing calls,
despite the fact that noncommercial telemarketing calls are
equally invasive to consumer privacy. (Order at 22-26.)
Additionally, the court found that the FTC has failed to
provide a valid reason or government interest in distin-
guishing between commercial and noncommercial speech.
Because the registry distinguishes between the indistinct,
therefore, the court found it unconstitutional.
In challenging the court’s analysis of whether the registry
materially advances the FTC’s privacy interest, the FTC first
side-steps and argues that it has demonstrated a different
valid interest in distinguishing between commercial and
noncommercial telemarketing calls. (Def.’s Br. at 3.) Specifi-
cally, the FTC claims that it found that charitable tele-
marketers are less likely than commercial telemarketers to
engage in abusive telemarketing practices, such as ignoring
consumers’ requests to be placed on company specific do—
not-call lists. (/d.)* The FTC’s newly—devised justification
‘The FTC now claims that it was never referring to fraud when it
refers to abusive telemarketing practices, but rather the failure to comply
with the company-specific do—not-call list. The FTC does, however, in
both its brief and the administrative record, list fraud as one its reasons for
distinguishing between commercial and noncommercial telemarketing in
the application of the registry: (68 Fed.Reg. 4635 (January 29, 2003);
Defs.’ Mot. for Summ. J. at 28 [stating that not—for—profit corporations
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finds no support in the evidence. The FTC claims that it came
to this new conclusion based on its past experience with the
company-—specific do—not-call lists, which have applied to
commercial telemarketers, but not charitable and political
telemarketers, for the past eight years. (Jd.) Because of the
limited application of the company-specific requirements, the
FTC has gathered no evidence concerning the issue of
whether noncommercial telemarketers will fail to enforce
company-specific do—not-call lists as those entities have
been exempt from such requirements until recently. (/d.) The
FTC’s argument is not persuasive.
The FTC found that the company-specific do—not-call
requirements were insufficient to protect consumer privacy.
Although the company-specific requirements have applied
solely to commercial telemarketers for the past eight years,
the FTC cites no real evidence that it is the commercial nature
of the calls which caused the company-specific require-
ments to fail in protecting consumer privacy. Instead, the
FTC found:
the company-specific approach is extremely burden-
some to consumers, who must repeat their “do—not-—call”
request with every telemarketer that calls; consumers’
repeated requests to be placed on a “do—not-call” list are
ignored; consumers have no way to verify that their
names have been taken off a company’s calling list;
consumers find that using the TCPA’s private right of
action is very complex and time-consuming, and places -
an evidentiary burden on the consumer who must keep
detailed lists of who called and when; and finally, even
if the consumer wins a lawsuit against a company, it is
difficult for the consumer to enforce the judgment.
68 Fed.Reg. at 4629 (January 29, 2003) (cited by FTC in
Def.’s Br. at 3). The problems with the company-specific
and political fundraisers “are less likely to engage in the sorts of . . .
deceptive acts or practices prohibited by the Telemarketing Act”).)
72a
method create no basis upon which to distinguish between
commercial and noncommercial speech in enactment of the
do-not-call registry. Rather, the problems go to the nature of
the company-—specific method itself, as opposed to commer-
cial telemarketers’ reactions to the requirements.
Furthermore, even if the problems with the company—
specific method related directly to commercial telemarketers’
behavior, such problems would still not form the proper basis
for distinction between commercial and noncommercial
telemarketing in the registry. Basically, the FTC claims it can
distinguish between commercial and noncommercial speech
in the application of the registry because the FTC has no
evidence from past experience that noncommercial telemar-
keters will behave like commercial telemarketers. Of course,
the FTC has never attempted to regulate noncommercial
telemarketers. The FTC’s argument to advance its distinction
between commercial and noncommercial speech is, therefore,
a “we don’t know,” interest, founded on the government’s
own ignorance. The government body seeking to sustain a
restriction on speech cannot satisfy this burden with specula-
tion or conjecture but must demonstrate that the harm is real.
Edenfield v. Fane, 507 U.S. 761, 770-771, 113 S.Ct. 1792,
1800, 123 L.Ed.2d 543 (1993). Here, the FTC has not
demonstrated that its interest justifies a distinction between
commercial and noncommercial speech; instead, it speculates
that the interest does.
Additionally, the FTC’s argument is circular. It asserts
that, because the FTC has always made illogical distinctions
based on the content of speech in its telemarketing rules, it
can continue to make these distinctions. The FTC cannot
bootstrap a substantial government interest from its own
previous regulatory behavior to justify content—discrimination
under the First Amendment. Accordingly, the FTC’s interest
in improving upon its company-specific do—not-call method
73a
does not justify a distinction between commercial and non-
commercial telemarketing.”
Secondly, the FTC claims it has a likelihood of success on
appeal because the court improperly analyzed City of Cincin-
nati v. Discovery Network, Inc., 507 U.S. 410, 113 S.Ct.
1505, 123 L.Ed.2d 99 (1993). (Def.’s Br. at 4.) Specifically,
the FTC claims that Discovery Network does not require the
FTC to justify the exclusion of noncommercial speech from
the registry’s coverage through a reason related to the interest
the registry is seeking to further. (/d.) According to the FTC,
the court in Discovery Network found the regulation uncon-
stitutional solely because of the minuscule percentage of
news racks affected by the regulation in relation to the city’s
asserted goal, as opposed to the content-based distinction
made by the regulation. (/d.)
The FTC is correct that the court found the regulation at
issue in Discovery Network unconstitutional partly because it
only achieved a numerically insignificant reduction in the
number of news racks in the city. Discovery Network, 507
U.S. at 417, 113 S.Ct. at 1510. According to the Court,
therefore, the city had not materially advanced its interest in
beautification. The Court, however, also noted, “[njot only
does Cincinnati’s categorical ban on commercial news racks
place too much importance on the distinction between com-
*In a footnote, the FTC argues that another reason for _ its
distinguishing between commercial and noncommercial telemarketing is
that Congress found noncommercial telemarketing to be less intrusive to
privacy when enacting the TCPA. In the administrative record, however,
the FTC specifically found that all telemarketing calls, whether commer-
cial or noncommercial, are intrusive to consumer privacy. 68 Fed.Reg. at
4637. Nowhere did the FTC find that noncommercial calls are less
intrusive. Because under intermediate scrutiny the court may only
consider those government interests asserted by the government,
Edenfield v. Fane, 507 U.S. at 768, 113 S.Ct. at 1798, interests asserted by
Congress under the TCPA are irrelevant to the constitutionality of the
FTC’s amended Rules.
74a
mercial and noncommercial speech, but in this case, the
distinction bears no relationship whatsoever to the particular
interests that the city has asserted.” Discovery Network, 507
U.S. at 424, 113 S.Ct. at 1514. It further stated, “Cincinnati
has not asserted an interest in preventing commercial harms
_. .. which is, of course, the typical reason why commercial
speech can be subject to greater governmental regulation than
noncommercial speech.” /d. at 426, 113 S.Ct. at 1515. Based
on Discovery Network, therefore, the government interest
asserted must bear some relationship to the distinction be-
tween commercial and noncommercial speech. Accordingly,
this court finds Discovery Network does not indicate that the
FTC has a likelihood of success on appeal.
Third, the FTC claims that the court failed to consider how
lightly the do—not—call registry restricts speech, considering
that consumers themselves choose whether to sign-up for the
list. (Def.’s Br. at 4.) The court, however, did consider this
characteristic of the registry in its Order when evaluating it
under Rowan v. United States Post Office Dept., 397 US.
728, 90 S.Ct. 1484, 25 L.Ed.2d 736, (1970). As set forth in the
Order, the FTC’s actions sufficiently entangle the government
in consumers’ choices so as to implicate the First Amendment
and require the government to demonstrate a substantial
government interest for its distinction between commercial
and noncommercial telemarketing. (Order at 19 [citing United
States v. Playboy Entm't Group, Inc., 529 U.S. 803, 812, 120
S.Ct. 1878, 1886, 146 L.Ed.2d 865 (2000)].) The FTC’s
attempt to re—hash the same argument does not demonstrate a
likelihood of success on appeal of the registry’s consti-
tutionality.
Finally, the FTC argues that it has a likelihood of success
on appeal because the court failed to consider cases from
other circuits where courts upheld content-based distinctions
in the commercial speech context. (Def.’s Br. at 5-8 [citing
Missouri v. Am. Blast Fax, Inc., 323 F.3d 649 (8th Cir.2003);
75a
Anderson v. Treadwell, 294 F.3d 453 (2d Cir.2002); Trans
Union Corp. v. Fed. Trade Comm'n, 267 F.3d 1138
(D.C.Cir.2001)].) The cases are distinguishable and do not
show the FTC has a likelihood of success on appeal.
First, in the Anderson case, the Second Circuit reviewed
the constitutionality of a New York statute that (1) prohibited
real estate solicitations in areas that the Secretary of State
determined had significant problems with intense and re-
peated solicitations by real estate brokers, and (2) enforced a
do-—not-solicit list of those individuals who did not want to be
disturbed by real estate brokers. Anderson, 294 F.3d at 453.
Although the Second Circuit found the statute consti-
tutional under the First Amendment, Anderson is distinguish-
able froni this case. The government in Anderson asserted an
interest in privacy, as the FTC has in this case. Anderson,
294 F.3d at 461. However, in Anderson the New York
Legislature had determined that real estate solicitations were
a unique problem to consumer privacy, over and above other
commercial solicitations, due to the phenomenon known as
“blockbusting.” /d. at 462. “Blockbusting” is a practice
whereby real estate brokers engage in aggressive solicitation
of homeowners by fanning racial tensions and promoting
panic—selling. /d. at 457. The court, therefore, found that the
government had a reason related to its interest to distinguish
between different types of commercial speech, unlike the
FTC in this case. In fact, the Second Circuit explicitly
distinguished Anderson from Discovery Network on this basis
and found that a distinction between types of commercial]
speech based on a legitimate reason is unlike a distinction
between commercial and noncommercial speech for First
Amendment purposes. /d. at 463-464. Here, the FTC has not
demonstrated that commercial telemarketing calls are a
unique problem over and above noncommercial telemar-
keting calls. Rather, the FTC has conceded just the opposite.
68 Fed.Reg. 4637. Because Anderson is distinguishable from
76a
this case, therefore, it does not show that the FTC has a
likelihood of success on appeal.
Similarly, Trans Union Corporation is distinguishable
from this case. In Trans Union Corporation, the District of
Columbia Circuit upheld the constitutionality of a provision
in the Fair Credit Reporting Act (“FCRA”), which permitted
the sale of consumer reports to facilitate offers of credit or
insurance but not to facilitate offers of other goods or
services. Trans Union Corp., 267 F.3d at 1138. The FTC in
Trans Union Corporation asserted an interest in protecting
personal financial data, while facilitating credit pursuant to
the purpose of FCRA. /d. at 1142-1143. The District of
Columbia Circuit found that the interest in protecti>g
personal data while facilitating credit entirely supported the
distinction between offers of credit and offers of goods and
services. Id at 1143. Unlike in this case, therefore, the
government interest supported the distinction between
different types of speech. Additionally, Trans Union Corpo-
ration only dealt with distinctions between types of commer-
cial speech, as opposed to commercial and noncommercial
speech as in this case. Accordingly, because the Trans Union
Corporation case is readily distinguishable from this case,
it does not show that the FTC has a likelihood of success
on appeal.
Finally, in the American Blast Fax case, the Eight Circuit
upheld the constitutionality of a provision in the Telephone
Consumer Protection Act (“TCPA”), which bans unsolicited,
commercial facsimiles but not unsolicited, noncommercial
facsimiles. Am. Blast Fax, Inc., 323 F.3d at 649. The govern-
ment asserted an interest in preventing unwanted facsimile
advertising from shifting advertising costs to unwilling
consumers and interfering with the reception of their
facsimile machines. Jd. at 654. Additionally, the government
noted, as a basis for distinguishing between commercial and
noncommercial speech, that Congress had found, in enacting
77a
the TCPA, that noncommercial calls are less intrusive to
consumers than commercial calls because they are more
expected. /d. at 655-656. The Eighth Circuit, deferred to this
congressional finding. Here, in contrast, the court has found
that the FTC has no valid reason to distinguish between
commercial and noncommercial telemarketing. See discus-
sion at n. 5 supra. The FTC cannot concoct a reason through
speculation or conjecture but must demonstrate that the harm
of commercial speech when compared to noncommercial
speech is real. See Edenfield, 507 U.S. at 770-771, 113 S.Ct.
at 1800.
The Seventh Circuit’s analysis in Pearson v. Edgar, 153
F.3d 397 (7th Ciz.1998) is the most persuasive case to this
court in determining the FTC’s likelihood of success on
appeal. In Pearson, the Illinois Legislature passed a statute
creating a do—not-solicit list prohibiting real estate brokers
from soliciting homeowners who put their names on the list.
Id. at 399. Illinois asserted an interest in protecting consumer
privacy and ending “blockbusting.” /d. at 402. Instead of
accepting Illinois’ coniecture that “blockbusting” was a
unique problem justifying a distinction between real estate
and other commercial solicitations, the court found that
Illinois had demonstrated no evidence that “blockbusting”
occurred with any frequency in Illinois. Jd The Seventh
Circuit found, therefore, that the only valid interest asserted
by the government to justify its content-based distinction was
the concern for consumer privacy. /d. Because other
commercial solicitations are as intrusive to consumer privacy
as real estate solicitations, the court struck down the statute as
unconstitutional. Jd. at 405. Since Pearson is the case most
analogous to the case before the court, the court finds that no
authority from other circuits supports the FTC’s assertion that
it has a likelihood of success on appeal. Accordingly, the
court holds that this factor in determining whether to grant a
stay of the court’s Order weighs against granting a stay.
78a
5. CONCLUSION
Two matters must be addressed before this order is filed.
First, as an overall justification for its motion, the FTC relies
heavily on an unpublished Order entered September 26, 2003,
by the United States Court of Appeals for the Tenth Circuit in
Mainstream Marketing Services, Inc. v. FCC, Case No. 03-
9571 (10th Cir. Sept. 26, 2003). There, in a parallel case
brought by these plaintiffs to review do—not-call rules
propounded by the Federal Communications Commission, the
Tenth Circuit denied plaintiffs’ request for a stay of the
FCC’s rules pending the appellate court’s review on the
merits. According to the FTC, the ruling controls the outcome
of this case.
The court is mindful and respectful of an order entered by a
panel of the court which will decide tie issues presented on
appeal of this case. Because the Order is apparently
unpublished, ’sowever, it is not binding in the sense that a
published opinion is binding. See 10th Cir. R. 36.3. More
important, the FTC’s argument overlooks the entirely
different procedural posture of the two cases. It does not
appear that the matter before the Tenth Circuit has been
argued on the merits or even briefed. See Mainstream
Marketing Services, Inc. v. FCC, Case No. 03-9571, slip op.
at 3 (10th Cir. Sept. 26, 2003) (ordering expedited argument
and briefing). In contrast, this court has had the benefit of
extensive briefing and an opportunity to address the merits of
the case. It has also reviewed the FTC’s administrative record
and factual materials submitted by the parties on cross—
motions of summary judgment. It is not clear whether any
administrative record is currently before the appellate court.
Indeed, because the FTC has taken the lead on the issue, it is
not clear whether the FCC made a separate record or relied to
some extent on the FTC record. Finally, it does not appear
that the parties made available to the Tenth Circuit the
information available to this court on the issues of irreparable
79a
injury to plaintiffs, injury to others, and the public interest
which is before this court. Because of this different
procedural context, the court declines the invitation to give
the appellate Order controlling effect here.
There is a second matter which the court mst address
before concluding this order. Citing news reports, plaintiffs
suggest that the FTC is violating the September 25, 2003.
Order by continuing to solicit persons to sign up for the
national registry. Plaintiffs also claim that the FTC is
attempting to side—step the Order by providing its registry to
the FCC for implementation on October 1, 2003. The court
regards the terms of its injunction and judgment as reasonably
clear and specific: the FTC is prohibited from “creating and
implementing” its do—not-call registry. The court assumes
that the FTC is familiar with the substantial body of case law
to the effect that a person enjoined cannot do indirectly
through another what it is prohibited from doing directly. The
FTC has appealed this court’s ruling, as is its legal right, and
the court will not assume, on the basis cf news reports, that
it will risk collateral proceedings by also trying to skirt
the Order.
Upon the foregoing findings and conclusions, it is
ORDERED that Defendant Federal Trade Commission’s
Motion for an Emergency Stay Pending Appeal is hereby
DENIED.
80a
APPENDIX E
UNITED STATES DISTRICT COURT
D. COLORADO
[Filed Sept. 25, 2003]
No. CIV. A. 03 N 0184
MAINSTREAM MARKETING SERVICES, INC., a Colorado
corporation, TMG MARKETING, INC., a Colorado corporation;
and AMERICAN TELESERVICES ASSOCIATION,
Plaintiffs,
¥.
FEDERAL TRADE COMMISSION; TIMOTHY J. Muris, Chairman
of the FEDERAL TRADE COMMISSION, in his official
capacity; SHEILA F. ANTHONY, Commissioner, FEDERAL
TRADE COMMISSION, in her official capacity: MOZELLE ‘V.
THOMPSON, Commissioner, FEDERAL TRADE COMMISSION,
in his official capacity; Orson Swindle, Commissioner,
FEDERAL TRADE COMMISSION, in his official capacity;
Tuomas B. LEARY, Commissioner, FEDERAL TRADE
COMMISSION, in his official capacity; and J. HOWARD
BEALES III, Director, Bureau of Consumer Protection, in
his official capacity,
Defendants.
MEMORANDUM OPINION AND ORDER
NOTTINGHAM, District Judge.
Thi- ase concerns the validity and constitutionality of the
Federal Trade Commission’s amended Telemarketing Sa!es
Rules (hereinafter “amended Rules”). The amended Rules
create a federal registry consisting of names and telephone
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numbers of consumers who have indicated, by placing their
name and number on the registry, that they do not wish to
eceive unsolicited telephone calls from those marketers to
whom the amended Rules apply. This is commonly known as
a do-not-call registry because the amended Rules prohibit
certain types of telemarketers from calling those telephone
numbers. The amended Rules also prohibit calls that, to make
mass calling more efficient, are dialed by equipment and
subsequently dropped when answered by the consumer
because the salesperson is delayed on a previous call. These
calls are denominated in the telemarketing industry as
abandoned calls.
Plaintiffs allege that, when the FTC promulgated the
amended Rules, it (1) violated the First and Fifth Amend-
ments to the United States Constitution; (2) exceeded its
Statutory authority under the Telemarketing and Consumer
Fraud and Abuse Prevention Act, 15 U.S.C.A. §§ 6101-6108
(West 1998 & Supp.2003) (hereinafter “Telemarketing Act”);
and (3) acted arbitrarily and capriciously under the
Administrative Procedure Act, 5 U.S.C.A. § 551 (West 1996
and Supp.2003) (“APA”). This matter is before the court on
(1) “Plaintiffs’ Motion for Summary Judgment,” filed May 2,
2003, (2) “Defendants’ Cross—Motion for Summary Judg-
ment,” filed May 30, 2003, and (3) the parties’ “Consent
Motion for Leave To Amend Complaint,” filed August 5,
2003. Because it is uncontested and plainly proper under the
federal rules, the motion to amend will be granted without
discussion. Jurisdiction is based on the existence of a federal
question. See 28 U.S.C.A. § 1331 (West 1993 & Supp.2003).
FACTS
1. Factual and Statutory Background
Many different erganizations, including businesses, chari-
ties, religious groups, and political parties, generate revenue
by calling individuals in their homes and soliciting sales and
donations. This practice, known as telemarketing, has grown
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into an industry that generates $275 billion dollars annually
and employs roughly 5.4 million persons in the United States.
(Mem. Supp. Pls.’ Mot. for Summ. J. at 7 [filed May 2, 2003]
[hereinafter “Pls.’ Br.”]) Organizations perform their tele-
‘marketing activities in a variety of ways. Some utilize their
own employees or volunteers to perform telemarketing activi-
ties. Others hire independent telemarketing companies that
operate call-centers to make solicitations on their behalf.
Plaintiffs Mainstream Marketing and TMG are independent
telemarketing companies based in Colorado. (First Am.
Compl. for Decl. and Inj. Relief #¥ 14, 17-18 [filed August 5,
2003] [hereinafter “Am. Compl.”}.) Plaintiff American Tele-
services Association is a national non-profit association of
telemarketing companies which represents its members’
commercial interests and engages in self-regulation of the
industry. (/d. J 19; Pls.’ Br. at 8.)
In 1991, Congress passed the Telephone Consumer Protec-
tion Act of 1991 (“TCPA”), wherein it granted the Federal
Communications Commission the authority to promulgate
rules creating a procedure to protect telephone subscribers
from receiving unwanted telemarketing calls. 4’ U.S.C.A.
§§ 227(c)(1)(A)HE), (c)(3) (West 2001 & Supp. ~003). The
TCPA suggests the creation of a national database as a
method of preventing subscribers’ reception of unwanted
calls, but it does not require the FCC to implement such a do—
not-call list. Jd. By its own terms, the TCPA prohibits
telemarketers from (1) using automatic telephone dialing
systems to make calls or send prerecorded messages to
emergency lines, hospital and e]derly home lines, and cellular
telephone lines, and (2) making any calls with prerecorded
messages to any line unless the FCC chooses to exempt
the particular type of telemarketer making the call. Id.
§ 227(b)(1)(A). Finally, the TCPA grants the FCC the
lim:ted authority to exempt telemarketers making
calls that are not made for a commercial purpose; and
such . . . calls made for a commercial purpose that the
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Commission determines will not adversely affect the
privacy rights that this section is intended to protect, and
do not include the transmission of any unsolicited
advertisement.
Id. § 227(b)(2)(B). As of January 2003, when this case was
filed, the FCC had utilized this grant of authority to pass rules
creating company-specific do—not-call lists and prohibiting
use of automatic telephone dialers and prerecorded messages,
but it had not yet adopted rules creating a national database
for a do—not-call registry. 47 C.F.R. § 64.1200 (2002).
I
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